~~false2021Q20001169770December 31http://fasb.org/us-gaap/2021-01-31#AccountingStandardsUpdate201613MemberP4YP10YP1YP3YP5YP7YP10YP10Y0.0250.025~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35522

BANC OF CALIFORNIA, INC.

(Exact name of registrant as specified in its charter)

Maryland

(State or other jurisdiction of

incorporation or organization)

04-3639825

(IRS Employer Identification No.)

3 MacArthur Place, Santa Ana, California

(Address of principal executive offices)

92707

(Zip Code)

(855) 361-2262

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐☒

Accelerated filer

☒☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

Table of ~~Contents~~Conte nts

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

BANC

New York Stock Exchange

~~Depositary Shares each representing a 1/40th interest in a share of 7.00% Non-Cumulative Perpetual Preferred Stock, Series E~~

~~BANC PRE~~

~~New York Stock Exchange~~

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

As of August 4, ~~2021,~~2022, the registrant had outstanding ~~50,314,976~~59,502,549 shares of voting common stock and 477,321 shares of Class B non-voting common stock.

Table of ~~Contents~~Conte nts

BANC OF CALIFORNIA, INC.

FORM 10-Q QUARTERLY REPORT

June 30, ~~2021~~2022

Table of Contents


		Page

Part I – Financial Information		4

Item 1 –	Financial Statements	4

	Consolidated Statements of Financial Condition	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Comprehensive Income	76
	Consolidated Statements of Stockholders' Equity	87
	Consolidated Statements of Cash Flows	109
	Notes to Consolidated Financial Statements	1110

Item 2 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4546

Item 3 –	Quantitative and Qualitative Disclosures About Market Risk	78

Item 4 –	Controls and Procedures	8081

Part II – Other Information		8182

Item 1 –	Legal Proceedings	8182

Item 1A –	Risk Factors	8182

Item 2 –	Unregistered Sales of Equity Securities and Use of Proceeds	82

Item 3 –	Defaults Upon Senior Securities	82

Item 4 –	Mine Safety Disclosures	82

Item 5 –	Other Information	82

Item 6 –	Exhibits	83

Signatures		84

Table of ~~Contents~~Conte nts

Forward-Looking Statements -

When used in this report and in documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements. These statements may relate to future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California, Inc. and its affiliates (“BANC,” the “Company”, “we”, “us” or “our”)~~, as well as the continuing effects of the COVID-19 pandemic on the Company’s business, operations, financial performance and prospects.~~. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:

i.the continuing effects of the COVID-19 pandemic and steps taken by governmental and other authorities to contain, mitigate and combat the pandemic on our business, operations, financial performance and prospects;

ii.the costs and effects of litigation, ~~generally,~~ including legal fees and other expenses, settlements and judgments;

iii.the risk that we will not be successful in the implementation of our capital utilization strategy, new lines of business, new products and services, or other strategic ~~project~~ initiatives;

iv.risks that the Company’s merger and acquisition transactions may disrupt current plans and operations and lead to difficulties in customer and employee retention, risks that the costs, fees, expenses and charges related to these transactions could be significantly higher than anticipated and risks that the expected revenues, cost savings, synergies, and other benefits of these transactions might not be realized to the extent anticipated, within the anticipated timetables, or at all;

v.the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including but not limited to, the effectiveness of our underwriting practices and the risk of fraud, any of which may lead to increased loan delinquencies, losses, and nonperforming assets in our loan portfolio, and may result in our allowance for credit losses not being adequate and require us to materially increase our credit loss reserves;

vi.the quality and composition of our securities portfolio;

vii.changes in general economic conditions, either nationally or in our market areas, including any impact of supply chain disruptions, or changes in financial ~~markets;~~markets, and the risk of recession;

viii.~~continuation of, or~~ changes in the ~~short-term~~ interest rate environment ~~changes in the~~and levels of general interest rates, ~~volatility~~including the recent and anticipated increases by the FRB in its benchmark rate, the ~~interest rate environment,~~impacts of inflation, the relative differences between short- and long-term interest rates, deposit interest rates, and their impact on our net interest margin, tangible book value, and the cost of funding sources;

ix.fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area;

x.our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;

xi.results of examinations ~~of us~~ by regulatory authorities of the Company and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, restrict our ability to invest in certain assets, increase our allowance for credit losses, ~~write-down~~result in write-downs of asset values, increase our capital levels, affect our ability to borrow funds or maintain or increase deposits, or impose fines, penalties or sanctions, any of which could adversely affect our liquidity and earnings;

xii.legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;

xiii.our ability to control operating costs and expenses;

xiv.staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges;

xv.the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;

xvi.errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation;

xvii.uncertainty regarding the expected discontinuation of the London Interbank Offered Rate (“LIBOR”) and the use of alternative reference rates;

xviii.failures or security breaches with respect to the network, applications, vendors and computer systems on which we depend, including but not limited to, due to cybersecurity threats;

~~xviii.~~xix.our ability to attract and retain key members of our senior management team;

~~xix.~~xx.increased competitive pressures among financial services companies;

~~xx.~~xxi.changes in consumer spending, borrowing and saving habits;

~~xxi.~~xxii.the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business;

~~xxii.~~xxiii.the ability of key third-party providers to perform their obligations to us;

~~xxiii.~~xxiv.changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting standards;

~~xxiv.~~xxv.continuing impact of the Financial Accounting Standards Board’s credit loss accounting standard, referred to as Current Expected Credit Loss, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses;

~~xxv.~~xxvi.share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting our common ~~shares~~stock and attempting to generate negative publicity about us;

~~xxvi.~~xxvii.our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or our bank subsidiary, or repurchases of our common ~~or preferred~~ stock; and

~~xxvii.~~xxviii.other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC, including, without limitation, the risks described under “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Further, statements about the potential effects of the proposed acquisition of Pacific Mercantile Bancorp (“PMBC”) on our business, financial results and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including (i) the possibility that the merger does not close when expected or at all because required regulatory or other approvals, financial tests or other conditions to closing are not received or satisfied on a timely basis or at all; (ii) changes in BANC’s or PMBC’s stock price before closing, including as a result of its financial performance prior to closing, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies; (iii) the risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which BANC and PMBC operate; (iv) the ability to promptly and effectively integrate the businesses of BANC and PMBC; (v) the reaction to the transaction of the companies’ customers, employees and counterparties; (vi) diversion of management time on merger-related issues; (vii) lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and (viii) other risks that are described in BANC’s and PMBC’s public filings with the SEC.

Table of ~~Contents~~Conte nts

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Amounts in thousands, except share and per share data)

(Unaudited)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	28,166	$	38,330	Cash and due from banks	$	43,736	$	41,729
Interest-earning deposits in financial institutions	Interest-earning deposits in financial institutions	135,166		182,489		Interest-earning deposits in financial institutions	199,328		186,394
Total cash and cash equivalents	Total cash and cash equivalents	163,332		220,819		Total cash and cash equivalents	243,064		228,123

Securities held-to-maturity, at amortized cost (fair value of $285,672 at June 30, 2022)						Securities held-to-maturity, at amortized cost (fair value of $285,672 at June 30, 2022)	329,272		—
Securities available-for-sale, at fair value	Securities available-for-sale, at fair value	1,353,154		1,231,431		Securities available-for-sale, at fair value	865,435		1,315,703
Loans held-for-sale, carried at fair value		2,853		1,413

Loans receivable	Loans receivable	5,985,477		5,898,405		Loans receivable	7,451,264		7,251,480
Allowance for loan losses	Allowance for loan losses	(75,885)		(81,030)		Allowance for loan losses	(93,793)		(92,584)
Loans receivable, net	Loans receivable, net	5,909,592		5,817,375		Loans receivable, net	7,357,471		7,158,896
Federal Home Loan Bank and other bank stock, at cost	Federal Home Loan Bank and other bank stock, at cost	44,569		44,506		Federal Home Loan Bank and other bank stock, at cost	51,489		44,632

Other real estate owned, net		3,253		0

Premises and equipment, net	Premises and equipment, net	118,649		121,520		Premises and equipment, net	108,523		112,868
Bank owned life insurance	Bank owned life insurance	113,168		111,807		Bank owned life insurance	125,326		123,720
Operating lease right-of-use assets	Operating lease right-of-use assets	20,364		19,633		Operating lease right-of-use assets	32,632		35,442
Investments in alternative energy partnerships, net	Investments in alternative energy partnerships, net	24,068		27,977		Investments in alternative energy partnerships, net	23,531		25,888
Deferred income taxes, net	Deferred income taxes, net	41,628		45,957		Deferred income taxes, net	54,455		50,774

Income tax receivable						Income tax receivable	4,563		7,952
Goodwill	Goodwill	37,144		37,144		Goodwill	95,127		94,301
Other intangible assets, net	Other intangible assets, net	2,069		2,633		Other intangible assets, net	4,677		6,411

Other assets	Other assets	193,570		195,119		Other assets	206,548		189,033
Total assets	Total assets	$	8,027,413	$	7,877,334	Total assets	$	9,502,113	$	9,393,743
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits	Noninterest-bearing deposits	$	1,808,918	$	1,559,248	Noninterest-bearing deposits	$	2,826,599	$	2,788,196
Interest-bearing deposits	Interest-bearing deposits	4,397,626		4,526,552		Interest-bearing deposits	4,732,084		4,651,239
Total deposits	Total deposits	6,206,544		6,085,800		Total deposits	7,558,683		7,439,435
Federal Home Loan Bank advances, net	Federal Home Loan Bank advances, net	490,419		539,795		Federal Home Loan Bank advances, net	511,695		476,059

Other borrowings	Other borrowings	125,000		0		Other borrowings	98,000		25,000
Long-term debt, net	Long-term debt, net	256,554		256,315		Long-term debt, net	274,587		274,386
Reserve for loss on repurchased loans	Reserve for loss on repurchased loans	5,095		5,515		Reserve for loss on repurchased loans	3,222		4,348

Operating lease liabilities	Operating lease liabilities	21,588		20,647		Operating lease liabilities	37,500		40,675

Accrued expenses and other liabilities	Accrued expenses and other liabilities	92,851		72,055		Accrued expenses and other liabilities	69,296		68,550
Total liabilities	Total liabilities	7,198,051		6,980,127		Total liabilities	8,552,983		8,328,453
Commitments and contingent liabilities	Commitments and contingent liabilities	0		0		Commitments and contingent liabilities	0		0
Preferred stock	Preferred stock	94,956		184,878		Preferred stock	—		94,956
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 52,724,192 shares issued and 50,313,228 shares outstanding at June 30, 2021; 52,178,453 shares issued and 49,767,489 shares outstanding at December 31, 2020		527		522
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2021 and at December 31, 2020		5		5
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 64,725,426 shares issued and 59,985,736 shares outstanding at June 30, 2022; 64,599,170 shares issued and 62,188,206 shares outstanding at December 31, 2021						Common stock, $0.01 par value per share, 446,863,844 shares authorized; 64,725,426 shares issued and 59,985,736 shares outstanding at June 30, 2022; 64,599,170 shares issued and 62,188,206 shares outstanding at December 31, 2021	647		646
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2022 and at December 31, 2021						Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2022 and at December 31, 2021	5		5
Additional paid-in capital	Additional paid-in capital	630,654		634,704		Additional paid-in capital	856,079		854,873
Retained earnings	Retained earnings	129,307		110,179		Retained earnings	210,471		147,894
Treasury stock, at cost (2,410,964 and 2,410,964 shares at June 30, 2021 and December 31, 2020)		(40,827)		(40,827)
Accumulated other comprehensive income, net		14,740		7,746
Treasury stock, at cost (4,739,690 and 2,410,964 shares at June 30, 2022 and December 31, 2021)						Treasury stock, at cost (4,739,690 and 2,410,964 shares at June 30, 2022 and December 31, 2021)	(84,013)		(40,827)
Accumulated other comprehensive (loss) income, net						Accumulated other comprehensive (loss) income, net	(34,059)		7,743
Total stockholders’ equity	Total stockholders’ equity	829,362		897,207		Total stockholders’ equity	949,130		1,065,290
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	8,027,413	$	7,877,334	Total liabilities and stockholders’ equity	$	9,502,113	$	9,393,743

See accompanying notes to consolidated financial statements (unaudited)

Table of ~~Contents~~Conte nts

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)


		Three Months Ended						Six Months Ended June 30,					Three Months Ended						Six Months Ended June 30,
		June 30, 2021		March 31, 2021		June 30, 2020		2021		2020			June 30, 2022		March 31, 2022		June 30, 2021		2022		2021
Interest and dividend income	Interest and dividend income											Interest and dividend income
Loans, including fees	Loans, including fees	$	61,900	$	61,345	$	63,642	$	123,245	$	129,176	Loans, including fees	$	78,895	$	76,234	$	61,900	$	155,129	$	123,245
Securities	Securities	6,986		6,501		7,816		13,487		15,636		Securities	8,124		7,309		6,986		15,433		13,487
Other interest-earning assets	Other interest-earning assets	791		772		1,239		1,563		2,599		Other interest-earning assets	1,399		726		791		2,125		1,563
Total interest and dividend income	Total interest and dividend income	69,677		68,618		72,697		138,295		147,411		Total interest and dividend income	88,418		84,269		69,677		172,687		138,295
Interest expense	Interest expense											Interest expense
Deposits	Deposits	3,543		4,286		10,205		7,829		24,816		Deposits	3,180		1,388		3,543		4,568		7,829
Federal Home Loan Bank advances	Federal Home Loan Bank advances	2,944		3,112		4,818		6,056		10,701		Federal Home Loan Bank advances	3,114		2,953		2,944		6,067		6,056
Securities sold under repurchase agreements		0		0		2		0		2

Long-term debt and other interest-bearing liabilities	Long-term debt and other interest-bearing liabilities	3,343		3,304		2,357		6,647		4,716		Long-term debt and other interest-bearing liabilities	3,825		3,487		3,343		7,312		6,647
Total interest expense	Total interest expense	9,830		10,702		17,382		20,532		40,235		Total interest expense	10,119		7,828		9,830		17,947		20,532
Net interest income	Net interest income	59,847		57,916		55,315		117,763		107,176		Net interest income	78,299		76,441		59,847		154,740		117,763
(Reversal of) provision for credit losses	(Reversal of) provision for credit losses	(2,154)		(1,107)		11,826		(3,261)		27,587		(Reversal of) provision for credit losses	—		(31,542)		(2,154)		(31,542)		(3,261)
Net interest income after (reversal of) provision for credit losses	Net interest income after (reversal of) provision for credit losses	62,001		59,023		43,489		121,024		79,589		Net interest income after (reversal of) provision for credit losses	78,299		107,983		62,001		186,282		121,024
Noninterest income	Noninterest income											Noninterest income
Customer service fees	Customer service fees	1,990		1,758		1,224		3,748		2,320		Customer service fees	2,578		2,434		1,990		5,012		3,748
Loan servicing income	Loan servicing income	38		268		95		306		170		Loan servicing income	109		212		38		321		306
Income from bank owned life insurance	Income from bank owned life insurance	690		672		591		1,362		1,169		Income from bank owned life insurance	810		796		690		1,606		1,362

Net gain on sale of securities available-for-sale	Net gain on sale of securities available-for-sale	0		0		2,011		0		2,011		Net gain on sale of securities available-for-sale	—		16		—		16		—
Fair value adjustment for loans held-for-sale		20		0		25		20		(1,561)
Net loss on sale of loans		0		0		0		0		(27)

Other income	Other income	1,432		1,683		1,582		3,115		3,507		Other income	3,689		2,452		725		6,141		2,836
Total noninterest income	Total noninterest income	4,170		4,381		5,528		8,551		7,589		Total noninterest income	7,186		5,910		3,443		13,096		8,252
Noninterest expense	Noninterest expense											Noninterest expense
Salaries and employee benefits	Salaries and employee benefits	25,042		25,719		24,260		50,761		47,696		Salaries and employee benefits	28,264		28,987		25,042		57,251		50,761
Naming rights termination		0		0		26,769		0		26,769

Occupancy and equipment	Occupancy and equipment	7,277		7,196		7,090		14,473		14,333		Occupancy and equipment	7,876		7,855		7,277		15,731		14,473
Professional fees	Professional fees	1,749		4,022		4,596		5,771		10,560		Professional fees	4,107		2,907		1,749		7,014		5,771

Data processing	Data processing	1,621		1,655		1,536		3,276		3,309		Data processing	1,782		1,828		1,621		3,610		3,276
Advertising and promotion		78		118		1,157		196		2,913

Regulatory assessments	Regulatory assessments	769		774		725		1,543		1,209		Regulatory assessments	1,021		775		769		1,796		1,543
(Gain) loss on investments in alternative energy partnerships		(829)		3,630		(167)		2,801		1,738
Loss (gain) on investments in alternative energy partnerships												Loss (gain) on investments in alternative energy partnerships	1,043		158		(829)		1,201		2,801
Reversal of provision for loan repurchases	Reversal of provision for loan repurchases	(99)		(132)		(34)		(231)		(634)		Reversal of provision for loan repurchases	(490)		(471)		(99)		(961)		(231)
Amortization of intangible assets	Amortization of intangible assets	282		282		430		564		859		Amortization of intangible assets	313		441		282		754		564

Merger-related costs	Merger-related costs	700		700		0		1,400		0		Merger-related costs	—		—		700		—		1,400

All other expense	All other expense	3,969		2,771		6,408		6,740		10,937		All other expense	4,696		4,116		3,320		8,812		6,637
Total noninterest expense	Total noninterest expense	40,559		46,735		72,770		87,294		119,689		Total noninterest expense	48,612		46,596		39,832		95,208		86,995
Income (loss) from operations before income taxes		25,612		16,669		(23,753)		42,281		(32,511)
Income tax expense (benefit)		6,562		2,294		(5,304)		8,856		(7,469)
Income from operations before income taxes												Income from operations before income taxes	36,873		67,297		25,612		104,170		42,281
Income tax expense												Income tax expense	10,161		18,785		6,562		28,946		8,856

Net income (loss)		19,050		14,375		(18,449)		33,425		(25,042)
Net income												Net income	26,712		48,512		19,050		75,224		33,425
Preferred stock dividends	Preferred stock dividends	1,727		3,141		3,442		4,868		6,975		Preferred stock dividends	—		1,420		1,727		1,420		4,868
Income allocated to participating securities	Income allocated to participating securities	0		62		0		122		0		Income allocated to participating securities	—		—		—		—		122
Participating securities dividends		0		0		94		0		188

Impact of preferred stock redemption	Impact of preferred stock redemption	0		3,347		(49)		3,347		(575)		Impact of preferred stock redemption	—		3,747		—		3,747		3,347
Net income (loss) available to common stockholders		$	17,323	$	7,825	$	(21,936)	$	25,088	$	(31,630)
Earnings (loss) per common share:
Net income available to common stockholders												Net income available to common stockholders	$	26,712	$	43,345	$	17,323	$	70,057	$	25,088
Earnings per common share:												Earnings per common share:

Basic	Basic	$	0.34	$	0.16	$	(0.44)	$	0.50	$	(0.63)	Basic	$	0.44	$	0.69	$	0.34	$	1.13	$	0.50

Diluted	Diluted	$	0.34	$	0.15	$	(0.44)	$	0.49	$	(0.63)	Diluted	$	0.43	$	0.69	$	0.34	$	1.13	$	0.49
Earnings (loss) per class B common share:
Earnings per class B common share:												Earnings per class B common share:

Basic	Basic	$	0.34	$	0.16	$	(0.44)	$	0.50	$	(0.63)	Basic	$	0.44	$	0.69	$	0.34	$	1.13	$	0.50

Diluted	Diluted	$	0.34	$	0.15	$	(0.44)	$	0.50	$	(0.63)	Diluted	$	0.44	$	0.69	$	0.34	$	1.13	$	0.50

See accompanying notes to consolidated financial statements (unaudited)

Table of ~~Contents~~Conte nts

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

Three Months Ended Six Months Ended
June 30,
June 30,
2021 March 31,
2021 June 30,
2020 2021 2020
Net income (loss) $ 19,050 $ 14,375 $ (18,449) $ 33,425 $ (25,042)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities:
Unrealized gain (loss) arising during the period 9,555 (2,561) 40,002 6,994 (2,246)
Reclassification adjustment for gain included in net income (loss) 0 0 (1,419) 0 (1,419)
Total change in unrealized gain (loss) on available-for-sale securities 9,555 (2,561) 38,583 6,994 (3,665)
Total other comprehensive income (loss) 9,555 (2,561) 38,583 6,994 (3,665)
Comprehensive income $ 28,605 $ 11,814 $ 20,134 $ 40,419 $ (28,707)


	Three Months Ended						Six Months Ended June 30,
	June 30, 2022		March 31, 2022		June 30, 2021		2022		2021
Net income	$	26,712	$	48,512	$	19,050	$	75,224	$	33,425
Other comprehensive (loss)/income, net of tax:
Unrealized (loss) gain on available-for-sale securities:
Unrealized (loss) gain arising during the period	(15,113)		(26,913)		9,555		(42,026)		6,994


Reclassification adjustment for gain included in net income	—		(11)		—		(11)		—
Total change in unrealized (loss) gain on available-for-sale securities	(15,113)		(26,924)		9,555		(42,037)		6,994





Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity	226		9		—		235		—
Total other comprehensive (loss)/income	(14,887)		(26,915)		9,555		(41,802)		6,994
Comprehensive income	$	11,825	$	21,597	$	28,605	$	33,422	$	40,419

See accompanying notes to consolidated financial statements (unaudited)

Table of ~~Contents~~Conte nts

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in ~~thousands)~~thousands, except share and per share data)

(Unaudited)


		Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity			Preferred Stock		Common Stock				Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
				Voting			Class B Non-Voting									Voting					Class B Non-Voting
Three Months Ended June 30, 2021
Balance at March 31, 2021		$	94,956		$	526		$	5	$	629,844	$	115,004	$	(40,827)		$	5,185	$	804,693
Three Months Ended June 30, 2022																					Three Months Ended June 30, 2022
Balance at March 31, 2022																					Balance at March 31, 2022	$	—	$	646	$	5	$	855,198	$	187,457	$	(45,125)	$	(19,172)	$	979,009

Comprehensive income:	Comprehensive income:																				Comprehensive income:
Net income	Net income	—			—			—		—		19,050		—			—		19,050		Net income	—		—		—		—		26,712		—		—		26,712
Other comprehensive income, net		—			—			—		—		—		—			9,555		9,555
Other comprehensive loss, net																					Other comprehensive loss, net	—		—		—		—		—		—		(14,887)		(14,887)
Issuance of common stock	Issuance of common stock	—			1			—		(1)		—		—			—		0		Issuance of common stock	—		1		—		(1)		—		—		—		—

Purchase of 2,113,176 shares of treasury stock																					Purchase of 2,113,176 shares of treasury stock	—		—		—		—		—		(38,888)		—		(38,888)

Share-based compensation expense	Share-based compensation expense	—			—			—		1,338		—		—			—		1,338		Share-based compensation expense	—		—		—		1,482		—		—		—		1,482

Restricted stock surrendered due to employee tax liability	Restricted stock surrendered due to employee tax liability	—			—			—		(527)		—		—			—		(527)		Restricted stock surrendered due to employee tax liability	—		—		—		(600)		—		—		—		(600)

Shares purchased under the Dividend Reinvestment Plan	Shares purchased under the Dividend Reinvestment Plan	—			—			—		—		(30)		—			—		(30)		Shares purchased under the Dividend Reinvestment Plan	—		—		—		—		(30)		—		—		(30)

Dividends declared ($0.06 per common share)	Dividends declared ($0.06 per common share)	—			—			—		—		(2,990)		—			—		(2,990)		Dividends declared ($0.06 per common share)	—		—		—		—		(3,668)		—		—		(3,668)
Preferred stock dividends	Preferred stock dividends	—			—			—		—		(1,727)		—			—		(1,727)		Preferred stock dividends	—		—		—		—		—		—		—		—
Balance at June 30, 2021		$	94,956		$	527		$	5	$	630,654	$	129,307	$	(40,827)		$	14,740	$	829,362
Balance at June 30, 2022																					Balance at June 30, 2022	$	—	$	647	$	5	$	856,079	$	210,471	$	(84,013)	$	(34,059)	$	949,130

Three Months Ended June 30, 2020
Balance at March 31, 2020		$	187,687		$	520		$	5	$	631,125	$	110,640	$	(40,827)		$	(54,148)	$	835,002
Three Months Ended June 30, 2021																					Three Months Ended June 30, 2021
Balance at March 31, 2021																					Balance at March 31, 2021	$	94,956	$	526	$	5	$	629,844	$	115,004	$	(40,827)	$	5,185	$	804,693

Comprehensive (loss) income:
Net loss		—			—			—		—		(18,449)		—			—		(18,449)
Other comprehensive income, net		—			—			—		—		—		—			38,583		38,583
Comprehensive income:																					Comprehensive income:
Net income																					Net income	—		—		—		—		19,050		—		—		19,050
Other comprehensive gain, net																					Other comprehensive gain, net	—		—		—		—		—		—		9,555		9,555
Issuance of common stock	Issuance of common stock	—			2			—		(2)		—		—			—		0		Issuance of common stock	—		1		—		(1)		—		—		—		—

Redemption of preferred stock		(2,650)			—			—		—		49		—			—		(2,601)

Share-based compensation expense	Share-based compensation expense	—			—			—		1,470		—		—			—		1,470		Share-based compensation expense	—		—		—		1,338		—		—		—		1,338
Restricted stock surrendered due to employee tax liability	Restricted stock surrendered due to employee tax liability	—			—			—		(476)		—		—			—		(476)		Restricted stock surrendered due to employee tax liability	—		—		—		(527)		—		—		—		(527)

Shares purchased under the Dividend Reinvestment Plan	Shares purchased under the Dividend Reinvestment Plan	—			—			—		—		(28)		—			—		(28)		Shares purchased under the Dividend Reinvestment Plan	—		—		—		—		(30)		—		—		(30)
Stock appreciation right dividend equivalents		—			—			—		—		(94)		—			—		(94)

Dividends declared ($0.06 per common share)	Dividends declared ($0.06 per common share)	—			—			—		—		(3,006)		—			—		(3,006)		Dividends declared ($0.06 per common share)	—		—		—		—		(2,990)		—		—		(2,990)
Preferred stock dividends	Preferred stock dividends	—			—			—		—		(3,442)		—			—		(3,442)		Preferred stock dividends	—		—		—		—		(1,727)		—		—		(1,727)
Balance at June 30, 2020		$	185,037		$	522		$	5	$	632,117	$	85,670	$	(40,827)		$	(15,565)	$	846,959
Balance at June 30, 2021																					Balance at June 30, 2021	$	94,956	$	527	$	5	$	630,654	$	129,307	$	(40,827)	$	14,740	$	829,362

See accompanying notes to consolidated financial statements (unaudited)

Table of ~~Contents~~Conte nts

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY, continued

(Amounts in thousands)

(Unaudited)


		Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity			Preferred Stock		Common Stock				Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
				Voting			Class B Non-Voting									Voting					Class B Non-Voting
Six Months Ended June 30, 2021
Balance at December 31, 2020		$	184,878		$	522		$	5	$	634,704	$	110,179	$	(40,827)		$	7,746	$	897,207
Six Months Ended June 30, 2022																					Six Months Ended June 30, 2022
Balance at December 31, 2021																					Balance at December 31, 2021	$	94,956	$	646	$	5	$	854,873	$	147,894	$	(40,827)	$	7,743	$	1,065,290

Comprehensive income:	Comprehensive income:																				Comprehensive income:
Net income	Net income	—			—			—		—		33,425		—			—		33,425		Net income	—		—		—		—		75,224		—		—		75,224
Other comprehensive income, net		—			—			—		—		—		—			6,994		6,994
Other comprehensive loss, net																					Other comprehensive loss, net	—		—		—		—		—		—		(41,802)		(41,802)
Issuance of common stock	Issuance of common stock	—			2			—		(2)		—		—			—		0		Issuance of common stock	—		1		—		(1)		—		—		—		—

Redemption of preferred stock	Redemption of preferred stock	(89,922)			—			—		—		(3,347)		—			—		(93,269)		Redemption of preferred stock	(94,956)		—		—		—		(3,747)		—		—		(98,703)

Purchase of 2,328,726 shares of treasury stock																					Purchase of 2,328,726 shares of treasury stock	—		—		—		—		—		(43,186)		—		(43,186)

Exercise of stock options		—			—			—		300		—		—			—		300
Exercise of SSARs		—			3			—		(5,375)		—		—			—		(5,372)

Share-based compensation expense	Share-based compensation expense	—			—			—		2,882		—		—			—		2,882		Share-based compensation expense	—		—		—		2,767		—		—		—		2,767

Restricted stock surrendered due to employee tax liability	Restricted stock surrendered due to employee tax liability	—			—			—		(1,855)		—		—			—		(1,855)		Restricted stock surrendered due to employee tax liability	—		—		—		(1,560)		—		—		—		(1,560)

Shares purchased under the Dividend Reinvestment Plan	Shares purchased under the Dividend Reinvestment Plan	—			—			—		—		(59)		—			—		(59)		Shares purchased under the Dividend Reinvestment Plan	—		—		—		—		(60)		—		—		(60)

Dividends declared ($0.12 per common share)	Dividends declared ($0.12 per common share)	—			—			—		—		(6,023)		—			—		(6,023)		Dividends declared ($0.12 per common share)	—		—		—		—		(7,420)		—		—		(7,420)
Preferred stock dividends	Preferred stock dividends	—			—			—		—		(4,868)		—			—		(4,868)		Preferred stock dividends	—		—		—		—		(1,420)		—		—		(1,420)
Balance at June 30, 2021		$	94,956		$	527		$	5	$	630,654	$	129,307	$	(40,827)		$	14,740	$	829,362
Balance at June 30, 2022																					Balance at June 30, 2022	$	—	$	647	$	5	$	856,079	$	210,471	$	(84,013)	$	(34,059)	$	949,130

Six Months Ended June 30, 2020
Balance at December 31, 2019		$	189,825		$	520		$	5	$	629,848	$	127,733	$	(28,786)		$	(11,900)	$	907,245
Impact of adoption of ASU No. 2016-13		—			—			—		—		(4,503)		—			—		(4,503)
Six Months Ended June 30, 2021																					Six Months Ended June 30, 2021
Balance at December 31, 2020																					Balance at December 31, 2020	$	184,878	$	522	$	5	$	634,704	$	110,179	$	(40,827)	$	7,746	$	897,207

Comprehensive loss:	Comprehensive loss:																				Comprehensive loss:
Net loss	Net loss	—			—			—		—		(25,042)		—			—		(25,042)		Net loss	—		—		—		—		33,425		—		—		33,425
Other comprehensive loss, net		—			—			—		—		—		—			(3,665)		(3,665)
Other comprehensive income, net																					Other comprehensive income, net	—		—		—		—		—		—		6,994		6,994
Issuance of common stock	Issuance of common stock	—			2			—		(2)		—		—			—		0		Issuance of common stock	—		2		—		(2)		—		—		—		—

Redemption of preferred stock	Redemption of preferred stock	(4,788)			—			—		—		575		—			—		(4,213)		Redemption of preferred stock	(89,922)		—		—		—		(3,347)		—		—		(93,269)

Repurchase of 827,584 shares of common stock		—			—			—		—		—		(12,041)			—		(12,041)

Exercise of stock options																					Exercise of stock options	—		—		—		300		—		—		—		300
Exercise of stock appreciation rights																					Exercise of stock appreciation rights	—		3		—		(5,375)		—		—		—		(5,372)

Share-based compensation expense	Share-based compensation expense	—			—			—		3,046		—		—			—		3,046		Share-based compensation expense	—		—		—		2,882		—		—		—		2,882
Restricted stock surrendered due to employee tax liability	Restricted stock surrendered due to employee tax liability	—			—			—		(775)		—		—			—		(775)		Restricted stock surrendered due to employee tax liability	—		—		—		(1,855)		—		—		—		(1,855)

Shares purchased under the Dividend Reinvestment Plan	Shares purchased under the Dividend Reinvestment Plan	—			—			—		—		(47)		—			—		(47)		Shares purchased under the Dividend Reinvestment Plan	—		—		—		—		(59)		—		—		(59)
Stock appreciation right dividend equivalents		—			—			—		—		(188)		—			—		(188)

Dividends declared ($0.12 per common share)	Dividends declared ($0.12 per common share)	—			—			—		—		(5,883)		—			—		(5,883)		Dividends declared ($0.12 per common share)	—		—		—		—		(6,023)		—		—		(6,023)
Preferred stock dividends	Preferred stock dividends	—			—			—		—		(6,975)		—			—		(6,975)		Preferred stock dividends	—		—		—		—		(4,868)		—		—		(4,868)
Balance at June 30, 2020		$	185,037		$	522		$	5	$	632,117	$	85,670	$	(40,827)		$	(15,565)	$	846,959
Balance at June 30, 2021																					Balance at June 30, 2021	$	94,956	$	527	$	5	$	630,654	$	129,307	$	(40,827)	$	14,740	$	829,362

See accompanying notes to consolidated financial statements (unaudited)

Table of ~~Contents~~Conte nts

BANC OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	33,425	$	(25,042)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
(Reversal of) provision for credit losses		(3,261)		27,587
Net income						Net income	$	75,224	$	33,425
Adjustments to reconcile net income to net cash provided by operating activities						Adjustments to reconcile net income to net cash provided by operating activities
Reversal of provision for credit losses						Reversal of provision for credit losses	(31,542)		(3,261)

Reversal of provision for loan repurchases	Reversal of provision for loan repurchases	(231)		(634)		Reversal of provision for loan repurchases	(961)		(231)
Depreciation on premises and equipment	Depreciation on premises and equipment	7,741		8,404		Depreciation on premises and equipment	7,920		7,741
Amortization of intangible assets	Amortization of intangible assets	564		859		Amortization of intangible assets	754		564
Amortization of debt issuance costs	Amortization of debt issuance costs	812		139		Amortization of debt issuance costs	837		812
Net amortization of premium on securities	Net amortization of premium on securities	774		258		Net amortization of premium on securities	587		774

Net accretion of deferred loan costs and fees	Net accretion of deferred loan costs and fees	(1,983)		(553)		Net accretion of deferred loan costs and fees	(81)		(1,983)
Net amortization (accretion) of premiums (discounts) on purchased loans		1,434		(355)
Write-off of other assets related to naming rights termination, net		0		6,669
Debt extinguishment fee		0		2,515
Deferred income tax benefit		(1,963)		(71)
Net amortization of premiums on purchased loans						Net amortization of premiums on purchased loans	652		1,434

Deferred income tax expense (benefit)						Deferred income tax expense (benefit)	975		(1,963)
Bank owned life insurance income	Bank owned life insurance income	(1,362)		(1,169)		Bank owned life insurance income	(1,606)		(1,362)
Share-based compensation expense	Share-based compensation expense	2,882		3,046		Share-based compensation expense	2,767		2,882
(Income) loss on interest rate swaps		(200)		288
Income from interest rate swaps						Income from interest rate swaps	(185)		(200)
Loss on investments in alternative energy partnerships and affordable housing investments	Loss on investments in alternative energy partnerships and affordable housing investments	4,864		4,033		Loss on investments in alternative energy partnerships and affordable housing investments	3,456		4,864

Impairment on capitalized software projects		0		157

Fair value adjustment for loans held-for-sale	Fair value adjustment for loans held-for-sale	(20)		1,561		Fair value adjustment for loans held-for-sale	—		(20)
Net loss on sale of loans		0		27

Net gain on sale of securities available-for-sale	Net gain on sale of securities available-for-sale	0		(2,011)		Net gain on sale of securities available-for-sale	(16)		—

Gain on sale-leaseback of branch						Gain on sale-leaseback of branch	(771)		—
Loss on disposal of property and equipment	Loss on disposal of property and equipment	0		106		Loss on disposal of property and equipment	8		—

Repurchase of mortgage loans	Repurchase of mortgage loans	(1,433)		0		Repurchase of mortgage loans	(1,262)		(1,433)

Proceeds from sales of and principal collected on loans held-for-sale		13		613

Proceeds from sales of and principal collected on other loans held-for-sale						Proceeds from sales of and principal collected on other loans held-for-sale	—		13

Change in accrued interest receivable and other assets	Change in accrued interest receivable and other assets	(3,246)		1,620		Change in accrued interest receivable and other assets	26,514		(3,246)

Change in accrued interest payable and other liabilities	Change in accrued interest payable and other liabilities	25,279		(30,093)		Change in accrued interest payable and other liabilities	(8,122)		25,279
Net cash provided by (used in) operating activities		64,089		(2,046)
Net cash provided by operating activities						Net cash provided by operating activities	75,148		64,089

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from sales of securities available-for-sale	Proceeds from sales of securities available-for-sale	0		22,728		Proceeds from sales of securities available-for-sale	17,645		—
Proceeds from maturities and calls of securities available-for-sale	Proceeds from maturities and calls of securities available-for-sale	100,230		30,000		Proceeds from maturities and calls of securities available-for-sale	38,500		100,230
Proceeds from principal repayments of securities available-for-sale		14,000		2,971
Purchases of securities available-for-sale						Purchases of securities available-for-sale	(15,000)		(226,813)
Proceeds from principal repayments of securities held-to-maturity and available-for-sale						Proceeds from principal repayments of securities held-to-maturity and available-for-sale	20,495		14,000

Purchases of securities available-for-sale		(226,813)		(322,590)

Loan originations and principal collections, net	Loan originations and principal collections, net	274,971		349,818		Loan originations and principal collections, net	474,252		274,971
Purchase of loans		(366,000)		(25,839)
Purchases of loans						Purchases of loans	(641,556)		(366,000)
Redemption of Federal Home Loan Bank stock	Redemption of Federal Home Loan Bank stock	436		22,171		Redemption of Federal Home Loan Bank stock	—		436
Purchase of Federal Home Loan Bank and other bank stock		(499)		(9,336)
Purchases of Federal Home Loan Bank and other bank stock						Purchases of Federal Home Loan Bank and other bank stock	(6,857)		(499)

Purchase of mortgage servicing rights						Purchase of mortgage servicing rights	(20,563)		—

Purchases of premises and equipment	Purchases of premises and equipment	(1,718)		(3,467)		Purchases of premises and equipment	(1,381)		(1,718)
Proceeds from sale-leaseback of branch						Proceeds from sale-leaseback of branch	2,400		—
Payments of capital lease obligations	Payments of capital lease obligations	(69)		(266)		Payments of capital lease obligations	—		(69)
Funding of equity investment		(1,879)		(14,201)
Decrease (increase) in investments in alternative energy partnerships		1,108		(2,630)
Net cash provided by investing activities		(206,233)		49,359
Funding of equity investments						Funding of equity investments	(3,950)		(1,879)
Decrease in investments in alternative energy partnerships						Decrease in investments in alternative energy partnerships	1,156		1,108
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(134,859)		(206,233)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in deposits	Net increase in deposits	120,744		610,298		Net increase in deposits	119,248		120,744
Net increase (decrease) in short-term Federal Home Loan Bank advances	Net increase (decrease) in short-term Federal Home Loan Bank advances	(50,000)		(447,000)		Net increase (decrease) in short-term Federal Home Loan Bank advances	35,000		(50,000)
Repayment of long-term Federal Home Loan Bank advances		0		(235,000)
Proceeds from long-term Federal Home Loan Bank advances		0		111,000
Debt extinguishment and financing fees paid		0		(9,368)

Net increase in other borrowings	Net increase in other borrowings	125,000		0		Net increase in other borrowings	73,000		125,000

Redemption of preferred stock	Redemption of preferred stock	(93,269)		(4,213)		Redemption of preferred stock	(98,703)		(93,269)

Purchase of treasury stock	Purchase of treasury stock	0		(12,041)		Purchase of treasury stock	(43,186)		—
Proceeds from exercise of stock options	Proceeds from exercise of stock options	300		0		Proceeds from exercise of stock options	—		300

Purchase of stock surrendered to pay tax liability	Purchase of stock surrendered to pay tax liability	(7,227)		(775)		Purchase of stock surrendered to pay tax liability	(1,560)		(7,227)
Dividend equivalents paid on participating securities		0		(188)

Dividends paid on preferred stock	Dividends paid on preferred stock	(4,868)		(6,975)		Dividends paid on preferred stock	(1,727)		(4,868)
Dividends paid on common stock	Dividends paid on common stock	(6,023)		(5,883)		Dividends paid on common stock	(7,420)		(6,023)
Net cash provided by (used in) financing activities		84,657		(145)
Net cash provided by financing activities						Net cash provided by financing activities	74,652		84,657
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(57,487)		47,168		Net change in cash and cash equivalents	14,941		(57,487)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	220,819		373,472		Cash and cash equivalents at beginning of period	228,123		220,819
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	163,332	$	420,640	Cash and cash equivalents at end of period	$	243,064	$	163,332

Supplemental cash flow information	Supplemental cash flow information					Supplemental cash flow information
Interest paid on deposits and borrowed funds	Interest paid on deposits and borrowed funds	19,996		40,626		Interest paid on deposits and borrowed funds	16,574		19,996
Income taxes paid	Income taxes paid	8,932		62		Income taxes paid	9,692		8,932

Supplemental disclosure of non-cash activities	Supplemental disclosure of non-cash activities					Supplemental disclosure of non-cash activities
Transfer from loans to other real estate owned, net	Transfer from loans to other real estate owned, net	3,253		0		Transfer from loans to other real estate owned, net	—		3,253

Reclassification of securities available-for-sale to held-to-maturity						Reclassification of securities available-for-sale to held-to-maturity	329,416		—

Equipment acquired under capital leases	Equipment acquired under capital leases	256		30		Equipment acquired under capital leases	—		256
Operating lease right-of-use assets recognized	Operating lease right-of-use assets recognized	3,883		0		Operating lease right-of-use assets recognized	1,253		3,883
Operating lease liabilities recognized	Operating lease liabilities recognized	3,883		0		Operating lease liabilities recognized	1,253		3,883
Impact of adoption of ASU 2016-13 on retained earnings		—		(4,503)

Commitments to fund low income housing tax credit investments						Commitments to fund low income housing tax credit investments	7,000		—
Goodwill adjustments for purchase accounting						Goodwill adjustments for purchase accounting	826		—

See accompanying notes to consolidated financial statements (unaudited)

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BANC OF CALIFORNIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, ~~2021~~2022

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations: Banc of California, Inc. (collectively, with its consolidated subsidiaries, the Company, we, us, and our) is a financial holding company under the Bank Holding Company Act of 1956, as amended, headquartered in Santa Ana, California and incorporated under the laws of Maryland. Banc of California, Inc. is subject to regulation by the Board of Governors of the Federal Reserve System (“FRB”) and its wholly-owned subsidiary, Banc of California, National Association (the “Bank”), operates under a national bank charter issued by the Office of the Comptroller of the Currency (“OCC”), the Bank's primary regulator. The Bank is a member of the Federal Home Loan Bank (“FHLB”) system, and maintains insurance on deposit accounts with the Federal Deposit Insurance Corporation (“FDIC”).

The Bank offers a variety of financial services to meet the banking and financial needs of the communities it serves, with operations conducted through 3031 full-service branches located throughout Southern California as of June 30, ~~2021.~~

~~Proposed Merger with Pacific Mercantile Bancorp:~~In March 2021, we entered into an agreement to merge (the “Merger Agreement”) with Pacific Mercantile Bancorp (“PMBC”), pursuant to which PMBC will merge (the “Merger”) with and into the Company, with the Company as the surviving corporation. Subject to the terms and conditions of the Merger Agreement, upon consummation of the Merger, each outstanding share of PMBC common stock, excluding certain specified shares, will be converted into the right to receive 0.50 (the “Exchange Ratio”) of a share of the Company's common stock. In addition, at the effective time of the Merger, the Company will cash out all outstanding share-based awards based on formulas using the average price of the Company's common stock for a 20-day trading period prior to the closing of the Merger. Subject to regulatory approval, the transaction is expected to close during the third quarter of 2021.2022.

Basis of Presentation: The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (“GAAP”) are not included herein. These interim statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed by us with the SEC. The December 31, ~~2020~~2021 consolidated statements of financial condition presented herein ~~has~~have been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC. Certain prior period amounts have been reclassified to conform to current period presentation, including i) reclassification of ~~income taxes receivable~~(i) loans held for sale to other assets in the consolidated statement of financial condition, (ii) fair value adjustment for loans held-for-sale to other income, (iii) income or loss from equity investments to other income, and ~~ii) reclassification of outside services~~(iv) advertising and promotion to all other expense ~~from "outside services fees" to "all other expense"~~ in the accompanying consolidated statements of operations.

In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated results of operations as of the dates and for the periods presented. The results of operations for the three and six months ended June 30, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~2022.

Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 and for the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021. Significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its then wholly-owned subsidiaries.

~~Adopted Accounting Pronouncements:~~ ~~On January 1, 2021, we adopted Accounting Standards Update (“ASU”) 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~ (“ASU 2019-12”) which simplifies the accounting for income taxes by removing certain exceptions for investments, intra-period allocations, and interim calculations, and adding guidance to reduce the complexity of applying Topic 740. The adoption of these amendments did not have a material effect on our consolidated financial statements.

Significant Accounting Policies: The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. We have not made any significant changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the ~~SEC.~~SEC, except for the accounting for securities held-to-maturity, as described below.

Securities Held-to-Maturity. Securities held-to-maturity consist of debt securities that the Company has the positive intent and ability to hold to maturity. These securities are recorded at cost, adjusted for the amortization of premiums or accretion of discounts. Premiums and discounts are amortized or accreted over the life of the security as an adjustment to its yield using the interest method. Transfers of debt securities into the held-to-maturity portfolio are accounted for at fair value. The unrealized gain or loss at the date of transfer is recognized as part of the amortized cost of the transferred security. This amount, along with the unrealized gain or loss included in accumulated other comprehensive income, is amortized or accreted over the life of the security as an adjustment to its yield using the interest method.

Securities held-to-maturity are analyzed for credit losses under ASC 326, which requires the Company to determine whether any impairment exists as of the reporting date and, as applicable, whether that impairment is due to credit deterioration. An allowance for credit losses would be established for losses on held-to-maturity debt securities due to credit deterioration and would be recorded as a component of provision for credit losses. Accrued interest is excluded from our expected credit loss estimates. Held-to-maturity debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity debt securities are placed on nonaccrual status, unpaid interest recognized as interest income is reversed.

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Mortgage Servicing Rights: Mortgage servicing rights ("MSRs") give the Company the contractual rights to receive service fees in exchange for performing loan servicing functions on behalf of investors who have an ownership interest in the mortgage loan balances. Purchased mortgage servicing rights are recorded at the purchase price at the time of acquisition, which approximates the fair value of such assets. Subsequent to acquisition, MSRs are accounted for under the amortization method and are then amortized over the period of estimated net servicing income (level yield method) generated from servicing the loans. MSRs are evaluated quarterly for impairment by estimating the fair value of the MSRs and comparing that value to their amortized cost. Impairment, if any, is recognized in a valuation allowance to the extent the fair value is less than the carrying amount of the MSRs. Subsequent increases in the fair value of impaired MSRs are recognized only up to the amount of the previously recognized valuation allowance. The estimated fair value of the MSRs is obtained through independent third party valuations based on an analysis of future cash flows, incorporating key assumptions including discount rates, prepayment speeds and interest rates that we believe are consistent with the assumptions used by other similar market participants in valuing MSRs.

We purchased $22.8 million of SFR mortgage servicing rights during the second quarter of 2022. The unpaid principal balance of the loans underlying these purchased servicing rights is approximately $1.73 billion at June 30, 2022. We do not have an ownership interest in the mortgage loan balances therefore those loans are not included in our consolidated statements of financial condition.

Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and disclosures provided, and actual results could differ. The allowance for credit losses (“ACL”) (which includes the allowance for loan losses (“ALL”) and the reserve for

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unfunded loan commitments), provision for credit losses, loan repurchase reserve, realization of deferred tax assets, valuation of goodwill and other intangible assets, valuation of investments in alternative energy partnerships, and the fair value measurement of financial instruments are particularly ~~subject to change~~complex and ~~such change could~~require judgment which may have a material effect on the consolidated financial statements.

Recent Accounting Guidance: ~~Beginning in June 2023, the London Interbank Offered Rate (“LIBOR”) will be discontinued. To assist entities with the transition away from LIBOR,~~In March 2022, the Financial Accounting Standards Board (“FASB”) ~~has~~ issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to ~~clarify GAAP~~disclose current-period gross write-offs for financing receivables and ~~provide practical expedients for entities to utilize during the time~~net investment in leases by year of ~~transition. We are~~origination in the process of evaluating the potential impact the discontinuation of LIBOR will have on our consolidated financial statements. The optional expedients and exceptions provided through this relief are set forth below and were effective immediately; however, certain provisions from this relief are not yet determined due to the fact that LIBOR has not yet been discontinued.

~~In March 2020, the FASB issued~~vintage disclosures. ASU ~~2020-04,~~ ~~Reference Rate Reform (Topic 848)~~, ("ASU 2020-04") which provided optional guidance, for a limited period of time, to ease the potential burden in accounting for (or recognizing the benefits of) reference rate reform on financial reporting. The amendments in ASU 2020-04 were elective and applied to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provided optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria. When elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant topic or industry subtopic within the codification that contains the guidance that otherwise would be required to be applied. The amendments in ASU 2020-04 were2022-02 is effective for ~~all entities as of March 12, 2020 through~~fiscal years beginning after December ~~31, 2022.~~

~~In January 2021, the FASB issued ASU 2021-01,~~ ~~Reference Rate Reform (Topic 848)~~("ASU 2021-01"). The amendments in ASU 2021-01 clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848,15, 2022, including interim periods within those fiscal years. Early adoption is permitted if ~~elected by~~ an entity apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this Update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments inhas adopted ASU 2021-01 are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments also optionally apply to all entities that designate receive-variable-rate, pay-variable-rate cross-currency interest rate swaps as hedging instruments in net investment hedges that are modified as a result of reference rate reform. The amendments in2016-13. ASU ~~2021-01 were effective immediately for all entities. ASU 2021-01~~2022-02 is not expected to have a material effect on our consolidated financial statements.

Business Combination:On October 18, 2021, we completed our merger with Pacific Mercantile Bancorp (“PMB”), pursuant to which PMB merged with and into the Company, with the Company as the surviving corporation. PMB was the bank holding company of the wholly-owned Pacific Mercantile Bank, a California state chartered commercial bank headquartered in Costa Mesa, California and operated 7 banking offices, including 3 full service branches, located throughout Southern California.

Under the terms and conditions of the merger, each outstanding share of PMB common stock, aggregating 23,713,417 shares, was converted into the right to receive 0.5 (the "Exchange Ratio") of a share of the Company's common stock. In addition, at the effective time of the merger, the Company paid $3.2 million in cash for all outstanding PMB share-based awards, including outstanding shares subject to unvested restricted stock awards. In the merger, the Company issued 11,856,713 shares of common stock with an estimated fair value of $222.2 million based upon the $18.74 closing price of the Company's common stock on October 18, 2021. Together with the cash consideration, this resulted in an aggregate purchase price of $225.4 million. The operating results of PMB have been included since the date of acquisition and consequently, may impact the comparison of the financial results for the periods presented.

Goodwill in the amount of $58.0 million was recognized and represents the synergies and economies of scale expected

from combining the operations of PMB with ours. Refer to Note 2 - Business Combinations in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC for further information.

NOTE 2 – FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair Value Hierarchy

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ASC 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The topic describes three levels of inputs that may be used to measure fair value:

•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

•Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Assets and Liabilities Measured on a Recurring Basis

Securities Available-for-Sale: The fair values of securities available-for-sale are generally determined by quoted market prices in active markets, if available (Level 1). If quoted market prices are not available, we primarily employ independent pricing services that utilize pricing models to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds,

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credit information, and respective terms and conditions for debt instruments (Level 2). We ~~employ procedures~~adhere to established processes to monitor the pricing ~~service's~~services' assumptions and ~~establish processes to~~ challenge the ~~pricing service's~~ valuations that appear unusual or unexpected. Multiple quotes or prices may be obtained in this process and we determine which fair value is most appropriate based on market information and analysis. Quotes obtained through this process are generally non-binding. We follow established procedures to ensure that assets and liabilities are properly classified in the fair value hierarchy. Level 2 securities include SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities, non-agency residential mortgage-backed securities, non-agency commercial mortgage-backed securities, collateralized loan obligations, and corporate debt securities. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and management's judgment and evaluation for valuation. ~~We had 0 securities available-for-sale classified as Level 3 at June 30, 2021 or December 31, 2020.~~

~~Loans Held-for-Sale, Carried at Fair Value:~~ The fair value of loans held-for-sale is based on commitments outstanding from investors and current offerings in the secondary market for portfolios with similar characteristics, except for loans that are repurchased out of GNMA loan pools that become severely delinquent which are valued based on an internal model. Loans held-for-sale subject to recurring fair value adjustments are classified as Level 2, or in the case of loans repurchased, Level 3. The fair value includes the servicing value of the loans and any accrued interest.

Derivative Assets and Liabilities:

Interest Rate ~~Swaps and Caps.~~Swaps. We offer interest rate swap ~~and cap~~ products to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans. We originate a variable rate loan and enter into a variable-to-fixed interest rate swap with the client. We also enter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow us to originate a variable rate loan while providing a contract for fixed interest payments for the client. The net cash flow for us is equal to the interest income received from a variable rate loan originated with the client plus a fee. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.

Foreign Exchange Contracts.

We offer short-term foreign exchange contracts to customers to purchase and/or sell foreign currencies at set rates in the future. These products allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. In conjunction with these products, we also enter into offsetting back-to-back contracts with institutional counterparties to hedge ~~the Company’s~~our foreign exchange rate risk. These back-to-back contracts are intended to offset each other and allow us to offer our customers foreign exchange products. The fair value of both of these offsetting asset and liability instruments is based on the change in the underlying foreign exchange rate. We are subject to counterparty risk in the event our customers or institutional counterparties default under these contracts. Given the short-term nature of the contracts, the counterparties’ credit risks are considered nominal and typically result in no adjustments to the valuation of the short-term foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of these contracts is classified as Level 2.

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The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:


				Fair Value Measurement Level									Fair Value Measurement Level
($ in thousands)	($ in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		($ in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2021
June 30, 2022										June 30, 2022
Assets										Assets
Securities available-for-sale:										Securities available-for-sale:
SBA loan pools securities										SBA loan pools securities	$	13,062	$	—	$	13,062	$	—
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities										U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	11,365		—		11,365		—
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations										U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	154,053		—		154,053		—

Non-agency residential mortgage-backed securities										Non-agency residential mortgage-backed securities	45,481		—		45,481		—

Collateralized loan obligations										Collateralized loan obligations	478,203		—		478,203		—
Corporate debt securities										Corporate debt securities	163,271		—		163,271		—

Derivative assets:										Derivative assets:

Interest rate swaps (1)										Interest rate swaps (1)	1,074		—		1,074		—
Foreign exchange contracts (1)										Foreign exchange contracts (1)	186		—		186		—
Liabilities										Liabilities
Derivative liabilities:										Derivative liabilities:

Interest rate swaps (2)										Interest rate swaps (2)	1,082		—		1,082		—

Foreign exchange contracts (2)										Foreign exchange contracts (2)	168		—		168		—

December 31, 2021										December 31, 2021
Assets	Assets									Assets
Securities available-for-sale:	Securities available-for-sale:									Securities available-for-sale:
SBA loan pools securities	SBA loan pools securities	$	16,223	$	0	$	16,223	$	0	SBA loan pools securities	$	14,591	$	—	$	14,591	$	—
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	197,685		0		197,685		0		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	191,969		—		191,969		—
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	265,184		0		265,184		0		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	241,541		—		241,541		—
Municipal securities	Municipal securities	120,980		0		120,980		0		Municipal securities	119,015		—		119,015		—
Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	155		0		155		0		Non-agency residential mortgage-backed securities	56,025		—		56,025		—

Collateralized loan obligations	Collateralized loan obligations	584,307		0		584,307		0		Collateralized loan obligations	518,964		—		518,964		—
Corporate debt securities	Corporate debt securities	168,620		0		168,620		0		Corporate debt securities	173,598		—		173,598		—
Loans held-for-sale, carried at fair value		2,853		0		1,912		941

Derivative assets:	Derivative assets:									Derivative assets:

Interest rate swaps and caps (1)		4,960		0		4,960		0
Interest rate swaps (1)										Interest rate swaps (1)	3,390		—		3,390		—
Foreign exchange contracts (1)	Foreign exchange contracts (1)	224		0		224		0		Foreign exchange contracts (1)	175		—		175		—
Liabilities	Liabilities									Liabilities
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:

Interest rate swaps and caps (2)		5,242		0		5,242		0

Interest rate swaps (2)										Interest rate swaps (2)	3,594		—		3,594		—
Foreign exchange contracts (2)	Foreign exchange contracts (2)	212		0		212		0		Foreign exchange contracts (2)	146		—		146		—

December 31, 2020
Assets
Securities available-for-sale:
SBA loan pools securities		$	17,354	$	0	$	17,354	$	0
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities		106,384		0		106,384		0
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations		211,831		0		211,831		0
Municipal securities		68,623		0		68,623		0
Non-agency residential mortgage-backed securities		160		0		160		0

Collateralized loan obligations		677,785		0		677,785		0
Corporate debt securities		149,294		0		149,294		0
Loans held-for-sale, carried at fair value		1,413		0		468		945

Derivative assets:

Interest rate swaps and caps (1)		7,304		0		7,304		0
Foreign exchange contracts (1)		328		0		328		0
Liabilities
Derivative liabilities:

Interest rate swaps and caps (2)		7,789		0		7,789		0
Foreign exchange contracts (2)		313		0		313		0

(1)Included in other assets in the Consolidated Statements of Financial Condition.

(2)Included in accrued expenses and other liabilities in the Consolidated Statements of Financial Condition.

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~~The following table presents a reconciliation of~~There were no assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the ~~periods indicated:~~

Three Months Ended
June 30, Six Months Ended
June 30,
($ in thousands) 2021 2020 2021 2020
Loans repurchased from GNMA Loan Pools
Balance at beginning of period $ 943 $ 17,127 $ 945 $ 19,233
Total gains (losses) (realized/unrealized):
Included in earnings—fair value adjustment 0 22 0 (1,369)
Sales, settlements, and other (2) (464) (4) (1,179)
Balance at end of period $ 941 $ 16,685 $ 941 $ 16,685

~~Loans repurchased from GNMA loan pools had aggregate unpaid principal balances of $1.1 million as of~~three and six months ended June 30, ~~2021~~2022 and December 31, 2020. The significant unobservable inputs used in the fair value measurement of our loans repurchased from GNMA loan pools at June 30, 2021 and December 31, 2020 included an expected loss rate of 1.55% for insured loans and 20.00% for uninsured loans. There may be inherent weaknesses in any valuation technique and/or changes in the underlying assumptions used such as discount rates and estimates of future cash flows could significantly affect the results.

~~Fair Value Option~~

~~Loans Held-for-Sale, Carried at Fair Value:~~ We elected the fair value option for certain SFR mortgage loans held-for-sale. Electing to measure SFR mortgage loans held-for-sale at fair value reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. We also elected to record loans repurchased from GNMA at fair value, as we intend to sell them after curing any defects and, accordingly, they are classified as held-for-sale.

~~The following table presents the fair value and aggregate principal balance of certain assets under the fair value option:~~

June 30, 2021 December 31, 2020
($ in thousands) Fair Value Unpaid Principal Balance Difference Fair Value Unpaid Principal Balance Difference
Loans held-for-sale, carried at fair value:
Total loans $ 2,853 $ 3,267 $ (414) $ 1,413 $ 1,680 $ (267)
Nonaccrual loans (1)
1,008 1,126 (118) 654 750 (96)

~~(1)Includes loans guaranteed by the U.S. government of $189 thousand and $190 thousand at June 30, 2021 and December 31, 2020.~~

~~There were 0 loans held-for-sale that were 90 days or more past due and still accruing interest as of June 30, 2021 and December 31, 2020.~~

The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The following table presents changes in fair value related to initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair value for the periods indicated:

Three Months Ended
June 30, Six Months Ended
June 30,
($ in thousands) 2021 2020 2021 2020
Net gains (losses) from fair value changes:
Fair value adjustment for loans held-for-sale $ 20 $ 25 $ 20 $ (1,561)

Interest income on loans held-for-sale under the fair value option is measured based on the contractual interest rate and reported in interest income on loans, including fees in the consolidated statements of operations.2021.

1413

Table of ~~Contents~~Conte nts

Assets and Liabilities Measured on a Non-Recurring Basis

~~Impaired~~Individually Evaluated Loans: The fair value of ~~impaired~~individually evaluated loans with specific allocations of the ACL based on collateral values is generally based on recent real estate appraisals and automated valuation models (“AVMs”). These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers for differences between the comparable sales and income data available. Such adjustments are typically deemed significant unobservable inputs used for determining fair value and result in a Level 3 classification.

The following table presents our financial assets and liabilities measured at fair value on a non-recurring basis as of the dates indicated:


				Fair Value Measurement Level									Fair Value Measurement Level
($ in thousands)	($ in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		($ in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2021
June 30, 2022										June 30, 2022
Assets	Assets									Assets

Collateral dependent loans:	Collateral dependent loans:									Collateral dependent loans:
Single family residential mortgage	Single family residential mortgage	$	2,319	$	0	$	0	$	2,319	Single family residential mortgage	$	3,600	$	—	$	—	$	3,600
Commercial and industrial	Commercial and industrial	130		0		0		130		Commercial and industrial	10,903		—		—		10,903

SBA	SBA	5,402		0		0		5,402		SBA	4,029		—		—		4,029

December 31, 2020
December 31, 2021										December 31, 2021
Assets	Assets									Assets
Collateral dependent loans:	Collateral dependent loans:									Collateral dependent loans:

Commercial and industrial										Commercial and industrial	$	12,272	$	—	$	—	$	12,272
SBA	SBA	$	629	$	0	$	0	$	629	SBA	3,886		—		—		3,886

The following table presents the gains (losses) recognized on assets measured at fair value on a non-recurring basis for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Collateral dependent loans:	Collateral dependent loans:									Collateral dependent loans:
Single family residential mortgage	Single family residential mortgage	$	(211)	$	0	$	(211)	$	22	Single family residential mortgage	$	(1)	$	(211)	$	(340)	$	(211)
Commercial and industrial	Commercial and industrial	20		(6,091)		38		(7,422)		Commercial and industrial	(564)		20		(1,198)		38
SBA	SBA	(376)		(670)		(509)		(1,189)		SBA	(198)		(376)		(172)		(509)

Other consumer										Other consumer	(216)		—		(243)		—
Commercial real estate	Commercial real estate	(140)		0		(140)		0		Commercial real estate	—		(140)		—		(140)

1514

Table of ~~Contents~~Conte nts

Estimated Fair Values of Financial Instruments

The following table presents the carrying amounts and estimated fair values of financial assets and liabilities as of the dates indicated:


		Carrying Amount			Fair Value Measurement Level												Carrying Amount			Fair Value Measurement Level
($ in thousands)	($ in thousands)			Level 1			Level 2			Level 3			Total	($ in thousands)					Level 1			Level 2			Level 3			Total
June 30, 2021
June 30, 2022																June 30, 2022
Financial assets	Financial assets															Financial assets
Cash and cash equivalents	Cash and cash equivalents	$	163,332		$	163,332		$	0		$	0		$	163,332	Cash and cash equivalents	$	243,064		$	243,064		$	—		$	—		$	243,064

Securities held-to-maturity																Securities held-to-maturity	329,272			—			285,672			—			285,672
Securities available-for-sale	Securities available-for-sale	1,353,154			0			1,353,154			0			1,353,154		Securities available-for-sale	865,435			—			865,435			—			865,435
Federal Home Loan Bank and other bank stock																Federal Home Loan Bank and other bank stock	51,489			—			51,489			—			51,489

Federal Home Loan Bank and other bank stock		44,569			0			44,569			0			44,569
Loans held-for-sale, carried at fair value		2,853			0			1,912			941			2,853

Loans receivable, net of allowance for credit losses	Loans receivable, net of allowance for credit losses	5,909,592			0			0			6,002,472			6,002,472		Loans receivable, net of allowance for credit losses	7,357,471			—			—			6,980,780			6,980,780
Accrued interest receivable	Accrued interest receivable	28,312			28,312			0			0			28,312		Accrued interest receivable	32,750			32,750			—			—			32,750
Derivative assets	Derivative assets	5,184			0			5,184			0			5,184		Derivative assets	1,260			—			1,260			—			1,260
Financial liabilities	Financial liabilities															Financial liabilities
Deposits	Deposits	6,206,544			0			0			6,207,271			6,207,271		Deposits	7,558,683			6,809,378			743,027			—			7,552,405
Advances from Federal Home Loan Bank	Advances from Federal Home Loan Bank	490,419			0			524,874			0			524,874		Advances from Federal Home Loan Bank	511,695			—			506,061			—			506,061

Other borrowings	Other borrowings	125,000			0			125,000			0			125,000		Other borrowings	98,000			—			98,017			—			98,017
Long-term debt	Long-term debt	256,554			0			274,219			0			274,219		Long-term debt	274,587			—			269,763			—			269,763
Derivative liabilities	Derivative liabilities	5,454			0			5,454			0			5,454		Derivative liabilities	1,250			—			1,250			—			1,250
Accrued interest payable	Accrued interest payable	3,348			3,348			0			0			3,348		Accrued interest payable	4,082			4,082			—			—			4,082

December 31, 2020
December 31, 2021																December 31, 2021
Financial assets	Financial assets															Financial assets
Cash and cash equivalents	Cash and cash equivalents	$	220,819		$	220,819		$	0		$	0		$	220,819	Cash and cash equivalents	$	228,123		$	228,123		$	—		$	—		$	228,123

Securities available-for-sale	Securities available-for-sale	1,231,431			0			1,231,431			0			1,231,431		Securities available-for-sale	1,315,703			—			1,315,703			—			1,315,703

Federal Home Loan Bank and other bank stock	Federal Home Loan Bank and other bank stock	44,506			0			44,506			0			44,506		Federal Home Loan Bank and other bank stock	44,632			—			44,632			—			44,632
Loans held-for-sale		1,413			0			468			945			1,413

Loans receivable, net of allowance for credit losses	Loans receivable, net of allowance for credit losses	5,817,375			0			0			5,936,708			5,936,708		Loans receivable, net of allowance for credit losses	7,158,896			—			—			7,150,703			7,150,703
Accrued interest receivable	Accrued interest receivable	29,445			29,445			0			0			29,445		Accrued interest receivable	30,991			30,991			—			—			30,991
Derivative assets	Derivative assets	7,632			0			7,632			0			7,632		Derivative assets	3,565			—			3,565			—			3,565
Financial liabilities	Financial liabilities															Financial liabilities
Deposits	Deposits	6,085,800			0			0			6,087,714			6,087,714		Deposits	7,439,435			6,932,717			506,711			—			7,439,428
Advances from Federal Home Loan Bank	Advances from Federal Home Loan Bank	539,795			0			585,416			0			585,416		Advances from Federal Home Loan Bank	476,059			—			500,323			—			500,323

Other borrowings																Other borrowings	25,000			—			25,000			—			25,000
Long-term debt	Long-term debt	256,315			0			273,230			0			273,230		Long-term debt	274,386			—			294,404			—			294,404
Derivative liabilities	Derivative liabilities	8,102			0			8,102			0			8,102		Derivative liabilities	3,740			—			3,740			—			3,740
Accrued interest payable	Accrued interest payable	3,714			3,714			0			0			3,714		Accrued interest payable	3,546			3,546			—			—			3,546

1615

Table of ~~Contents~~Conte nts

NOTE 3 – INVESTMENT SECURITIES

The following table presents the amortized cost and fair value of the investment securities portfolio as of the dates indicated:


($ in thousands)	($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2021
June 30, 2022										June 30, 2022
Securities held-to-maturity:										Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities										U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	153,621	$	—	$	(18,334)	$	135,287
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations										U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	61,447		—		(8,051)		53,396
Municipal securities										Municipal securities	114,204		—		(17,215)		96,989

Total securities held-to-maturity										Total securities held-to-maturity	$	329,272	$	—	$	(43,600)	$	285,672
Securities available-for-sale:										Securities available-for-sale:
SBA loan pool securities										SBA loan pool securities	$	13,085	$	—	$	(23)	$	13,062
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities										U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	12,051		—		(686)		11,365
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations										U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	160,657		258		(6,862)		154,053

Non-agency residential mortgage-backed securities										Non-agency residential mortgage-backed securities	53,122		—		(7,641)		45,481

Collateralized loan obligations										Collateralized loan obligations	492,775		—		(14,572)		478,203
Corporate debt securities										Corporate debt securities	165,266		973		(2,968)		163,271
Total securities available-for-sale										Total securities available-for-sale	$	896,956	$	1,231	$	(32,752)	$	865,435
December 31, 2021										December 31, 2021

Securities available-for-sale:	Securities available-for-sale:									Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	16,301	$	0	$	(78)	$	16,223	SBA loan pool securities	$	14,679	$	—	$	(88)	$	14,591
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	191,029		6,656		0		197,685		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	190,382		2,898		(1,311)		191,969
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	262,515		3,468		(799)		265,184		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	242,458		1,171		(2,088)		241,541
Municipal securities	Municipal securities	117,996		3,338		(354)		120,980		Municipal securities	117,913		2,641		(1,539)		119,015
Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	151		4		0		155		Non-agency residential mortgage-backed securities	56,014		11		—		56,025

Collateralized loan obligations	Collateralized loan obligations	587,275		0		(2,968)		584,307		Collateralized loan obligations	521,275		—		(2,311)		518,964
Corporate debt securities	Corporate debt securities	156,988		11,632		0		168,620		Corporate debt securities	162,002		11,603		(7)		173,598
Total securities available-for-sale	Total securities available-for-sale	$	1,332,255	$	25,098	$	(4,199)	$	1,353,154	Total securities available-for-sale	$	1,304,723	$	18,324	$	(7,344)	$	1,315,703
December 31, 2020

Securities available-for-sale:
SBA loan pool securities		$	17,436	$	0	$	(82)	$	17,354
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities		99,591		6,793		0		106,384
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations		209,426		2,571		(166)		211,831
Municipal securities		64,355		4,272		(4)		68,623
Non-agency residential mortgage-backed securities		156		4		0		160

Collateralized loan obligations		687,505		0		(9,720)		677,785
Corporate debt securities		141,975		7,319		0		149,294
Total securities available-for-sale		$	1,220,444	$	20,959	$	(9,972)	$	1,231,431

During the first quarter of 2022, certain longer-duration fixed-rate mortgage-backed securities and municipal securities with an amortized cost basis of $346.0 million were transferred from the available-for-sale portfolio to the held-to-maturity portfolio. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which along with the related unrealized loss in accumulated other comprehensive income, is being amortized into interest income as a yield adjustment over the remaining term of the securities.

At June 30, ~~2021,~~2022, our investment securities portfolio consisted of agency securities, municipal securities, mortgage-backed securities, collateralized loan obligations (“CLOs”), and corporate debt securities. The expected maturities of these types of securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

There was 0no allowance for credit losses for debt securities held-to-maturity and available-for sale as of June 30, ~~2021~~2022 and December 31, ~~2020.~~ 2021. The Company does not consider unrealized losses on these securities to be attributable to credit-related factors, as the unrealized losses have occurred as a result of changes in non-credit related factors such as interest rates, market spreads, and market conditions subsequent to purchase.

Accrued interest receivable on debt securities held-to-maturity and available-for-sale totaled ~~$4.5~~$5.5 million and $4.7 million at ~~both~~ June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, and is included within other assets in the accompanying consolidated statements of financial condition.

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were no holdings of any one issuer, other than ~~the~~ U.S. government agency and sponsored enterprises, in an amount greater than 10 percent of our stockholders’ equity.

Table of Conte nts

The following table presents proceeds from sales and calls of securities available-for-sale and the associated gross gains and losses realized through earnings upon the sales and calls of securities available-for-sale for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Gross realized gains	Gross realized gains	$	0	$	2,011	$	0	$	2,011	Gross realized gains	$	—	$	—	$	209	$	—
Gross realized losses	Gross realized losses	0		0		0		0		Gross realized losses	—		—		(193)		—
Net realized gains on sales and calls	Net realized gains on sales and calls	$	0	$	2,011	$	0	$	2,011	Net realized gains on sales and calls	$	—	$	—	$	16	$	—
Proceeds from sales and calls	Proceeds from sales and calls	$	100,230	$	22,728	$	100,230	$	52,728	Proceeds from sales and calls	$	38,500	$	100,230	$	56,145	$	100,230

Investment securities with carrying values of $28.9 million and $43.7 million as of June 30, 2021 and December 31, 2020, were pledged to secure FHLB advances, public deposits or for other purposes as required or permitted by law.

~~Table of Contents~~

The following table summarizes the investment securities available-for-sale with unrealized losses by security type and length of time in a continuous, unrealized loss position as of the dates indicated:


		Less Than 12 Months				12 Months or Longer				Total					Less Than 12 Months				12 Months or Longer				Total
($ in thousands)	($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
June 30, 2021
June 30, 2022														June 30, 2022

Securities available-for-sale:	Securities available-for-sale:													Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	16,223	$	(78)	$	0	$	0	$	16,223	$	(78)	SBA loan pool securities	$	—	$	—	$	13,062	$	(23)	$	13,062	$	(23)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities														U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	11,365		(686)		—		—		11,365		(686)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations														U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	86,032		(4,126)		21,159		(2,736)		107,191		(6,862)

Non-agency residential mortgage-backed securities														Non-agency residential mortgage-backed securities	45,481		(7,641)		—		—		45,481		(7,641)

Collateralized loan obligations														Collateralized loan obligations	218,486		(6,514)		240,717		(8,058)		459,203		(14,572)
Corporate debt securities														Corporate debt securities	88,532��		(2,968)		—		—		88,532		(2,968)
Total securities available-for-sale														Total securities available-for-sale	$	449,896	$	(21,935)	$	274,938	$	(10,817)	$	724,834	$	(32,752)

December 31, 2021														December 31, 2021

Securities available-for-sale:														Securities available-for-sale:
SBA loan pool securities														SBA loan pool securities	$	—	$	—	$	14,591	$	(88)	$	14,591	$	(88)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities														U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	67,588		(1,311)		—		—		67,588		(1,311)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	41,799		(799)		0		0		41,799		(799)		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	85,290		(1,184)		17,754		(904)		103,044		(2,088)
Municipal securities	Municipal securities	28,382		(354)		0		0		28,382		(354)		Municipal securities	44,748		(919)		10,762		(620)		55,510		(1,539)

Collateralized loan obligations	Collateralized loan obligations	91,888		(112)		298,414		(2,856)		390,302		(2,968)		Collateralized loan obligations	81,962		(38)		253,002		(2,273)		334,964		(2,311)

Corporate debt securities														Corporate debt securities	4,993		(7)		—		—		4,993		(7)
Total securities available-for-sale	Total securities available-for-sale	$	178,292	$	(1,343)	$	298,414	$	(2,856)	$	476,706	$	(4,199)	Total securities available-for-sale	$	284,581	$	(3,459)	$	296,109	$	(3,885)	$	580,690	$	(7,344)

December 31, 2020

SBA loan pool securities		$	17,354	$	(82)	$	0	$	0	$	17,354	$	(82)

U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations		19,033		(166)		0		0		19,033		(166)
Municipal securities		11,401		(4)		0		0		11,401		(4)

Collateralized loan obligations		64,775		(225)		613,010		(9,495)		677,785		(9,720)

Total securities available-for-sale		$	112,563	$	(477)	$	613,010	$	(9,495)	$	725,573	$	(9,972)

At June 30, ~~2021,~~2022, our securities available-for-sale portfolio consisted of ~~127~~79 securities, of which 3863 securities were in an unrealized loss position. At December 31, ~~2020,~~2021, our securities available-for-sale portfolio consisted of ~~103~~119 securities, of which 5046 securities were in an unrealized loss position.

We monitor our securities portfolio to ensure it has adequate credit support. ~~The majority of unrealized losses are related to our collateralized loan obligations.~~ We consider the lowest credit rating for identification of credit impairment for collateralized loan obligations and other securities. ~~As of June 30, 2021, all~~The decline in fair value of our ~~collateralized loan obligations investment~~ securities ~~in an unrealized loss position received an investment grade credit rating. The improvement in fair value~~since acquisition was attributable to a combination of changes in interest rates and ~~tightening~~general volatility in the credit

Table of ~~credit spreads from improving~~Conte nts

market conditions in response to the economic ~~conditions.~~uncertainty caused by the global pandemic, rising inflation and conflict between Russia and Ukraine. We do not currently intend to sell any of the securities in an unrealized loss position and further believe, it is more likely than not, that we will not be required to sell these securities before their anticipated recovery. ~~Securities that are~~As of June 30, 2022, all of our collateralized loan obligations investment securities in an unrealized ~~gain~~loss position ~~or are trading at par are evaluated for continued inclusion in our portfolio based on interest rate, liquidity and yield objectives of the Company.~~received an investment grade credit rating.

During the three and six months ended June 30, 2022 and 2021, ~~and 2020, 0~~there was no provision for credit losses related to securities ~~available-for-sale was recorded.~~held-to-maturity or available-for-sale.

The following table presents the amortized cost and fair value of the investment securities portfolio, based on the earlier of contractual maturity dates or next repricing date, as of June 30, 2022:


	Held-to-Maturity				Available-for-Sale
($ in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Maturity:
Within one year	$	—	$	—	$	592,364	$	577,867
One to five years	—		—		162,240		159,271
Five to ten years	19,351		17,134		65,645		60,513
Greater than ten years	309,921		268,538		76,707		67,784
Total	$	329,272	$	285,672	$	896,956	$	865,435

Contractual maturities may not reflect the actual maturities of the investments. The average lives for mortgage-backed securities and collateralized mortgage obligations likely will be faster than their contractual maturities due to prepayments and amortization.

Pledged Securities

Investment securities with carrying values of $123.2 million and $8.9 million as of June 30, 2022 and December 31,2021 were pledged to the FRB Discount Window. Investments securities with carrying value of $205.5 million and zero as of June 30, 2022 and December 31, 2021 were pledged to secure FHLB advances.

Table of ~~Contents~~Conte nts

The following table presents the fair value and ~~yield information~~weighted average yields using amortized cost of the ~~investment~~ securities held-to-maturity portfolio as of June 30, 2022, based on the earlier of contractual maturity dates or next repricing ~~date,~~dates:


	One year or less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total
($ in thousands)	Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	—	—	%	$	135,287	2.69	%	$	135,287	2.69	%
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	—		—	%	—		—	%	—		—	%	53,396		2.64	%	53,396		2.64	%
Municipal securities	—		—	%	—		—	%	17,134		2.19	%	79,855		2.71	%	96,989		2.62	%



Total securities held-to-maturity	$	—	—	%	$	—	—	%	$	17,134	2.19	%	$	268,538	2.68	%	$	285,672	2.66	%

The following table presents the fair value and weighted average yields using amortized cost of the securities available-for-sale portfolio as of June 30, ~~2021:~~2022, based on the earlier of contractual maturity dates or next repricing dates:


		One year or less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total					One year or less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total
($ in thousands)	($ in thousands)	Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		($ in thousands)	Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield		Fair Value		Weighted-Average Yield
Securities available-for-sale:	Securities available-for-sale:																					Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	16,223	1.53	%	$	0	0	%	$	0	0	%	$	0	0	%	$	16,223	1.53	%	SBA loan pool securities	$	13,062	1.06	%	$	—	—	%	$	—	—	%	$	—	—	%	$	13,062	1.06	%
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	0		0	%	0		0	%	29,694		2.20	%	167,991		2.15	%	197,685		2.15	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	11,365		2.23	%	—		—	%	11,365		2.23	%
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	109,168		0.64	%	11,360		1.98	%	43,331		1.34	%	101,325		1.80	%	265,184		1.25	%	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	86,602		1.73	%	9,630		2.24	%	35,518		1.55	%	22,303		1.81	%	154,053		1.73	%
Municipal securities		0		0	%	0		0	%	15,469		2.62	%	105,511		2.38	%	120,980		2.41	%

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	0		0	%	0		0	%	0		0	%	155		6.35	%	155		6.35	%	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	45,481		2.51	%	45,481		2.51	%

Collateralized loan obligations	Collateralized loan obligations	584,307		1.82	%	0		0	%	0		0	%	0		0	%	584,307		1.82	%	Collateralized loan obligations	478,203		2.70	%	—		—	%	—		—	%	—		—	%	478,203		2.70	%
Corporate debt securities	Corporate debt securities	0		0	%	150,108		4.82	%	18,512		5.73	%	0		0	%	168,620		4.91	%	Corporate debt securities	—		—	%	149,641		4.71	%	13,630		5.73	%	—		—	%	163,271		4.80	%
Total securities available-for-sale	Total securities available-for-sale	$	709,698	1.64	%	$	161,468	4.62	%	$	107,006	2.41	%	$	374,982	2.12	%	$	1,353,154	2.17	%	Total securities available-for-sale	$	577,867	2.52	%	$	159,271	4.56	%	$	60,513	2.52	%	$	67,784	2.29	%	$	865,435	2.87	%

Table of ~~Contents~~Conte nts

NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following table presents the balances in our loan portfolio as of the dates indicated:


($ in thousands)	($ in thousands)	June 30, 2021		December 31, 2020		($ in thousands)	June 30, 2022		December 31, 2021

Commercial:	Commercial:					Commercial:
Commercial and industrial(1)	Commercial and industrial(1)	$	2,070,910	$	2,088,308	Commercial and industrial(1)	$	2,433,464	$	2,668,984
Commercial real estate	Commercial real estate	871,790		807,195		Commercial real estate	1,204,414		1,311,105
Multifamily	Multifamily	1,325,770		1,289,820		Multifamily	1,572,308		1,361,054
SBA~~(1)~~(2)	SBA~~(1)~~(2)	253,924		273,444		SBA~~(1)~~(2)	92,235		205,548
Construction	Construction	150,557		176,016		Construction	228,341		181,841

Consumer:	Consumer:					Consumer:
Single family residential mortgage	Single family residential mortgage	1,288,176		1,230,236		Single family residential mortgage	1,832,279		1,420,023

Other consumer	Other consumer	24,350		33,386		Other consumer	88,223		102,925
Total loans~~(2)~~	Total loans~~(2)~~	$	5,985,477	$	5,898,405	Total loans~~(2)~~	$	7,451,264	$	7,251,480

Allowance for loan losses	Allowance for loan losses	(75,885)		(81,030)		Allowance for loan losses	(93,793)		(92,584)
Loans receivable, net	Loans receivable, net	$	5,909,592	$	5,817,375	Loans receivable, net	$	7,357,471	$	7,158,896

(1)Includes ~~994 PPP loans totaling $193.9 million, net~~warehouse lending balances of ~~unamortized loan fees totaling $3.9 million~~$1.16 billion and $1.60 billion at June 30, ~~2021~~2022 and ~~949 PPP loans totaling $210.0 million, net of unamortized loan fees totaling $1.6 million at~~ December 31, ~~2020.~~2021.

(2)Includes ~~net deferred loan origination costs (fees) and premiums (discounts) of $7.9 million and $6.2~~79 PPP loans totaling $28.4 million at June 30, ~~2021~~2022 and 397 PPP loans totaling $123.1 million at December 31, ~~2020.~~2021.

The following table presents the balances of total loans as of the dates indicated:


($ in thousands)	June 30, 2022		December 31, 2021
Unpaid principal balance	$	7,436,887	$	7,245,952
Unamortized net premiums	25,960		18,005
Unamortized net deferred (fees) costs	(902)		819
Unamortized SBA PPP fees	(21)		(831)
Fair value adjustment(1)	(10,660)		(12,465)
Total loans	$	7,451,264	$	7,251,480

(1)At June 30, 2022. includes $9.0 million related to the PMB Acquisition, of which $4.3 million related to PCD loans. At December 31, 2021, includes $10.6 million related to the PMB Acquisition, of which $3.9 million related to PCD loans.

Credit Quality Indicators

We categorize loans into risk categories based on relevant information about the ability of borrowers to repay their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We perform a historical loss analysis that is combined with a comprehensive loan to value analysis to analyze the associated risks in the current loan portfolio. We analyze loans individually and grade each loan for credit risk. This analysis includes all loans delinquent over 60 days and non-homogeneous loans such as commercial and commercial real estate loans. We use the following definitions for credit risk ratings:

Pass: Loans ~~risk rated~~classified as pass are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or ~~“Doubtful”.~~“Doubtful.”

Special Mention: Loans risk rated as special mention have a potential ~~weaknesses~~weakness that ~~deserve~~deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or of our credit position at some future date.

Substandard: Loans risk rated as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so ~~risk rated~~classified have a well-defined ~~weaknesses~~weakness or ~~weaknesses~~a weakness that ~~jeopardize~~jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Table of Conte nts

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

2021

Table of ~~Contents~~Conte nts

The following table presents the risk categories for total loans by class of loans and origination year as of June 30, ~~2021:~~2022:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
($ in thousands)	($ in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total		($ in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total
June 30, 2021
June 30, 2022																				June 30, 2022

Commercial:	Commercial:																			Commercial:
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass	Pass	$	63,904	$	78,232	$	67,139	$	54,977	$	47,160	$	110,094	$	1,537,335	$	12,107	$	1,970,948	Pass	$	151,151	$	217,900	$	69,281	$	74,539	$	82,341	$	181,285	$	1,528,413	$	11,741	$	2,316,651
Special mention	Special mention	0		3,373		6,238		12,438		12,188		5,909		4,497		7,456		52,099		Special mention	3,367		5,373		30		516		1,877		18,566		13,160		2,516		45,405
Substandard	Substandard	0		0		16,983		5,056		0		9,000		13,194		3,479		47,712		Substandard	—		1,265		4,586		14,162		12,377		3,207		35,359		452		71,408
Doubtful	Doubtful	0		0		0		0		0		0		0		151		151		Doubtful	—		—		—		—		—		—		—		—		—
Commercial and industrial	Commercial and industrial	63,904		81,605		90,360		72,471		59,348		125,003		1,555,026		23,193		2,070,910		Commercial and industrial	154,518		224,538		73,897		89,217		96,595		203,058		1,576,932		14,709		2,433,464
Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	184,810		66,509		137,581		164,619		54,366		217,358		2,112		1,578		828,933		Pass	188,712		385,057		61,027		118,169		161,165		271,356		1,167		66		1,186,719
Special mention	Special mention	0		0		0		9,330		0		13,466		3,762		0		26,558		Special mention	—		—		—		—		1,909		1,770		—		—		3,679
Substandard	Substandard	0		0		510		0		0		14,648		0		0		15,158		Substandard	—		—		—		—		4,188		8,936		892		—		14,016
Doubtful	Doubtful	0		0		0		0		0		1,141		0		0		1,141		Doubtful	—		—		—		—		—		—		—		—		—
Commercial real estate	Commercial real estate	184,810		66,509		138,091		173,949		54,366		246,613		5,874		1,578		871,790		Commercial real estate	188,712		385,057		61,027		118,169		167,262		282,062		2,059		66		1,204,414
Multifamily	Multifamily																			Multifamily
Pass	Pass	201,010		211,775		322,319		246,988		97,009		189,812		4		0		1,268,917		Pass	424,820		405,151		158,545		263,048		116,158		160,374		9,384		—		1,537,480
Special mention	Special mention	0		0		20,862		0		0		34,046		0		0		54,908		Special mention	—		—		4,968		—		11,165		—		—		—		16,133
Substandard	Substandard	0		0		0		0		0		1,945		0		0		1,945		Substandard	—		—		—		—		—		18,695		—		—		18,695
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Multifamily	Multifamily	201,010		211,775		343,181		246,988		97,009		225,803		4		0		1,325,770		Multifamily	424,820		405,151		163,513		263,048		127,323		179,069		9,384		—		1,572,308
SBA	SBA																			SBA
Pass	Pass	134,635		68,126		7,603		1,188		3,520		22,325		760		355		238,512		Pass	5,310		32,808		9,532		2,453		1,276		23,115		628		156		75,278
Special mention	Special mention	0		0		1,743		0		200		1,220		0		5		3,168		Special mention	—		—		—		3,909		219		1,091		—		2		5,221
Substandard	Substandard	0		0		0		0		3,883		6,392		251		1,237		11,763		Substandard	—		—		338		190		385		9,361		666		796		11,736
Doubtful	Doubtful	0		0		0		391		0		0		0		90		481		Doubtful	—		—		—		—		—		—		—		—		—
SBA	SBA	134,635		68,126		9,346		1,579		7,603		29,937		1,011		1,687		253,924		SBA	5,310		32,808		9,870		6,552		1,880		33,567		1,294		954		92,235

2122

Table of ~~Contents~~Conte nts


Construction	Construction																			Construction
Pass	Pass	15,611		39,643		27,224		18,345		40,620		0		0		0		141,443		Pass	52,355		86,325		30,183		10,288		15,223		25,446		(26)		—		219,794
Special mention	Special mention	0		0		0		1,537		0		7,577		0		0		9,114		Special mention	—		—		—		—		—		8,547		—		—		8,547
Substandard	Substandard	0		0		0		0		0		0		0		0		0		Substandard	—		—		—		—		—		—		—		—		—
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Construction	Construction	15,611		39,643		27,224		19,882		40,620		7,577		0		0		150,557		Construction	52,355		86,325		30,183		10,288		15,223		33,993		(26)		—		228,341
Consumer:	Consumer:																			Consumer:
Single family residential mortgage	Single family residential mortgage																			Single family residential mortgage
Pass	Pass	318,744		149,166		91,340		188,589		119,392		372,782		14,032		0		1,254,045		Pass	473,398		815,560		77,676		50,930		102,538		290,831		6,135		—		1,817,068
Special mention	Special mention	0		0		0		3,132		696		7,174		0		0		11,002		Special mention	651		222		—		670		902		3,547		—		226		6,218
Substandard	Substandard	0		0		0		6,450		1,738		14,690		251		0		23,129		Substandard	—		—		—		339		6,091		2,563		—		—		8,993
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Single family residential mortgage	Single family residential mortgage	318,744		149,166		91,340		198,171		121,826		394,646		14,283		0		1,288,176		Single family residential mortgage	474,049		815,782		77,676		51,939		109,531		296,941		6,135		226		1,832,279
Other consumer	Other consumer																			Other consumer
Pass	Pass	499		0		0		21		0		1,829		19,845		1,965		24,159		Pass	12,734		19,886		10,469		6,538��		3,843		19,725		12,893		1,639		87,727
Special mention	Special mention	0		0		0		0		0		28		64		0		92		Special mention	—		—		—		3		—		21		63		58		145
Substandard	Substandard	0		0		0		0		0		0		99		0		99		Substandard	—		—		59		—		73		35		—		184		351
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Other consumer	Other consumer	499		0		0		21		0		1,857		20,008		1,965		24,350		Other consumer	12,734		19,886		10,528		6,541		3,916		19,781		12,956		1,881		88,223

Total loans	Total loans	$	919,213	$	616,824	$	699,542	$	713,061	$	380,772	$	1,031,436	$	1,596,206	$	28,423	$	5,985,477	Total loans	$	1,312,498	$	1,969,547	$	426,694	$	545,754	$	521,730	$	1,048,471	$	1,608,734	$	17,836	$	7,451,264

Total loans	Total loans																			Total loans
Pass	Pass	$	919,213	$	613,451	$	653,206	$	674,727	$	362,067	$	914,200	$	1,574,088	$	16,005	$	5,726,957	Pass	$	1,308,480	$	1,962,687	$	416,713	$	525,965	$	482,544	$	972,132	$	1,558,594	$	13,602	$	7,240,717
Special mention	Special mention	0		3,373		28,843		26,437		13,084		69,420		8,323		7,461		156,941		Special mention	4,018		5,595		4,998		5,098		16,072		33,542		13,223		2,802		85,348
Substandard	Substandard	0		0		17,493		11,506		5,621		46,675		13,795		4,716		99,806		Substandard	—		1,265		4,983		14,691		23,114		42,797		36,917		1,432		125,199
Doubtful	Doubtful	0		0		0		391		0		1,141		0		241		1,773		Doubtful	—		—		—		—		—		—		—		—		—
Total loans	Total loans	$	919,213	$	616,824	$	699,542	$	713,061	$	380,772	$	1,031,436	$	1,596,206	$	28,423	$	5,985,477	Total loans	$	1,312,498	$	1,969,547	$	426,694	$	545,754	$	521,730	$	1,048,471	$	1,608,734	$	17,836	$	7,451,264

2223

Table of ~~Contents~~Conte nts

The following table presents the risk categories for total loans by class of loans and origination year as of December 31, ~~2020:~~2021:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
($ in thousands)	($ in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total		($ in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Amortized Cost Basis Converted to Term		Total
December 31, 2020
December 31, 2021																				December 31, 2021

Commercial:	Commercial:																			Commercial:
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass	Pass	$	99,015	$	78,783	$	70,248	$	52,786	$	44,536	$	92,129	$	1,572,259	$	9,945	$	2,019,701	Pass	$	254,218	$	81,177	$	71,950	$	78,461	$	56,439	$	110,490	$	1,888,126	$	9,679	$	2,550,540
Special mention	Special mention	0		928		2,748		7,986		1,574		2,271		1,500		225		17,232		Special mention	1,206		5,971		13,721		835		7,272		9,846		20,460		6,348		65,659
Substandard	Substandard	0		13,937		6,262		4,618		0		9,264		12,598		4,696		51,375		Substandard	2		241		17,853		11,378		3,374		117		17,429		2,391		52,785
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Commercial and industrial	Commercial and industrial	99,015		93,648		79,258		65,390		46,110		103,664		1,586,357		14,866		2,088,308		Commercial and industrial	255,426		87,389		103,524		90,674		67,085		120,453		1,926,015		18,418		2,668,984
Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	75,432		150,731		192,831		63,144		91,454		182,756		2,682		1,582		760,612		Pass	465,524		82,759		140,108		192,263		85,755		317,941		8,416		71		1,292,837
Special mention	Special mention	0		0		9,452		0		2,518		14,754		3,761		0		30,485		Special mention	—		—		—		1,925		—		2,920		—		—		4,845
Substandard	Substandard	0		0		0		0		0		16,098		0		0		16,098		Substandard	—		—		506		—		—		9,084		3,833		—		13,423
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Commercial real estate	Commercial real estate	75,432		150,731		202,283		63,144		93,972		213,608		6,443		1,582		807,195		Commercial real estate	465,524		82,759		140,614		194,188		85,755		329,945		12,249		71		1,311,105
Multifamily	Multifamily																			Multifamily
Pass	Pass	239,449		407,532		275,881		110,105		97,160		154,841		27		0		1,284,995		Pass	410,958		208,396		315,119		157,640		61,457		158,464		4		—		1,312,038
Special mention	Special mention	0		2,050		0		0		0		803		0		0		2,853		Special mention	—		1,988		—		11,261		—		33,065		—		—		46,314
Substandard	Substandard	0		0		0		0		0		1,972		0		0		1,972		Substandard	—		—		—		—		—		2,702		—		—		2,702
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Multifamily	Multifamily	239,449		409,582		275,881		110,105		97,160		157,616		27		0		1,289,820		Multifamily	410,958		210,384		315,119		168,901		61,457		194,231		4		—		1,361,054
SBA	SBA																			SBA
Pass	Pass	211,962		14,082		1,260		3,746		11,087		18,589		3,111		1,014		264,851		Pass	106,749		23,972		8,049		1,957		10,836		28,495		928		143		181,129
Special mention	Special mention	0		1,768		0		212		415		874		0		6		3,275		Special mention	—		1,586		3,618		236		—		596		—		4		6,040
Substandard	Substandard	0		0		0		1,319		682		1,855		226		755		4,837		Substandard	—		5,888		—		390		3,358		7,245		599		899		18,379
Doubtful	Doubtful	0		0		390		0		0		0		0		91		481		Doubtful	—		—		—		—		—		—		—		—		—
SBA	SBA	211,962		15,850		1,650		5,277		12,184		21,318		3,337		1,866		273,444		SBA	106,749		31,446		11,667		2,583		14,194		36,336		1,527		1,046		205,548

2324

Table of ~~Contents~~Conte nts


Construction	Construction																			Construction
Pass	Pass	41,677		30,387		45,397		50,024		0		0		0		0		167,485		Pass	67,074		32,995		29,038		17,139		25,485		—		—		—		171,731
Special mention	Special mention	0		0		1,537		0		6,994		0		0		0		8,531		Special mention	—		—		—		1,607		—		8,503		—		—		10,110
Substandard	Substandard	0		0		0		0		0		0		0		0		0		Substandard	—		—		—		—		—		—		—		—		—
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Construction	Construction	41,677		30,387		46,934		50,024		6,994		0		0		0		176,016		Construction	67,074		32,995		29,038		18,746		25,485		8,503		—		—		181,841
Consumer:	Consumer:																			Consumer:
Single family residential mortgage	Single family residential mortgage																			Single family residential mortgage
Pass	Pass	149,382		140,129		271,667		161,332		237,285		227,711		15,252		0		1,202,758		Pass	713,844		96,339		67,075		140,329		88,123		277,247		12,828		—		1,395,785
Special mention	Special mention	0		0		1,837		688		4,868		4,460		0		0		11,853		Special mention	—		1,644		339		910		692		6,838		—		—		10,423
Substandard	Substandard	0		157		491		1,079		4,978		8,920		0		0		15,625		Substandard	—		—		—		11,005		975		1,601		—		234		13,815
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Single family residential mortgage	Single family residential mortgage	149,382		140,286		273,995		163,099		247,131		241,091		15,252		0		1,230,236		Single family residential mortgage	713,844		97,983		67,414		152,244		89,790		285,686		12,828		234		1,420,023
Other consumer	Other consumer																			Other consumer
Pass	Pass	38		0		47		0		0		1,876		27,644		2,218		31,823		Pass	26,179		13,556		8,891		5,265		9,038		15,951		21,327		2,331		102,538
Special mention	Special mention	0		0		0		0		0		30		1,185		0		1,215		Special mention	—		—		4		—		—		25		63		—		92
Substandard	Substandard	0		0		0		0		0		0		274		74		348		Substandard	—		61		14		148		46		26		—		—		295
Doubtful	Doubtful	0		0		0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—		—		—
Other consumer	Other consumer	38		0		47		0		0		1,906		29,103		2,292		33,386		Other consumer	26,179		13,617		8,909		5,413		9,084		16,002		21,390		2,331		102,925

Total loans	Total loans	$	816,955	$	840,484	$	880,048	$	457,039	$	503,551	$	739,203	$	1,640,519	$	20,606	$	5,898,405	Total loans	$	2,045,754	$	556,573	$	676,285	$	632,749	$	352,850	$	991,156	$	1,974,013	$	22,100	$	7,251,480

Total loans	Total loans																			Total loans
Pass	Pass	$	816,955	$	821,644	$	857,331	$	441,137	$	481,522	$	677,902	$	1,620,975	$	14,759	$	5,732,225	Pass	$	2,044,546	$	539,194	$	640,230	$	593,054	$	337,133	$	908,588	$	1,931,629	$	12,224	$	7,006,598
Special mention	Special mention	0		4,746		15,574		8,886		16,369		23,192		6,446		231		75,444		Special mention	1,206		11,189		17,682		16,774		7,964		61,793		20,523		6,352		143,483
Substandard	Substandard	0		14,094		6,753		7,016		5,660		38,109		13,098		5,525		90,255		Substandard	2		6,190		18,373		22,921		7,753		20,775		21,861		3,524		101,399
Doubtful	Doubtful	0		0		390		0		0		0		0		91		481		Doubtful	—		—		—		—		—		—		—		—		—
Total loans	Total loans	$	816,955	$	840,484	$	880,048	$	457,039	$	503,551	$	739,203	$	1,640,519	$	20,606	$	5,898,405	Total loans	$	2,045,754	$	556,573	$	676,285	$	632,749	$	352,850	$	991,156	$	1,974,013	$	22,100	$	7,251,480

2425

Table of ~~Contents~~Conte nts

Past Due Loans

The following table presents the aging of the recorded investment in past due loans, excluding accrued interest receivable (which is not considered to be material), by class of loans as of the dates indicated:


($ in thousands)	($ in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past due		Total Past Due		Current		Total		($ in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past due		Total Past Due		Current		Total
June 30, 2021
Non-Traditional Mortgage (NTM) loans:
Single family residential mortgage		$	7,191	$	0	$	2,669	$	9,860	$	451,114	$	460,974

Other consumer		0		0		0		0		1,601		1,601
Total NTM loans		7,191		0		2,669		9,860		452,715		462,575
Traditional loans:
June 30, 2022														June 30, 2022
Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	9		587		3,157		3,753		2,067,157		2,070,910		Commercial and industrial	3,433		2,567		7,204		13,204		2,420,260		2,433,464
Commercial real estate	Commercial real estate	0		0		911		911		870,879		871,790		Commercial real estate	893		—		—		893		1,203,521		1,204,414
Multifamily	Multifamily	796		0		0		796		1,324,974		1,325,770		Multifamily	—		—		—		—		1,572,308		1,572,308
SBA	SBA	880		0		6,942		7,822		246,102		253,924		SBA	4,766		115		10,087		14,968		77,267		92,235
Construction	Construction	0		0		0		0		150,557		150,557		Construction	—		—		—		—		228,341		228,341

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	6,497		1,023		4,319		11,839		815,363		827,202		Single family residential mortgage	23,226		2,848		6,430		32,504		1,799,775		1,832,279
Other consumer	Other consumer	0		0		0		0		22,749		22,749		Other consumer	437		—		184		621		87,602		88,223
Total traditional loans		8,182		1,610		15,329		25,121		5,497,781		5,522,902

Total	Total	$	15,373	$	1,610	$	17,998	$	34,981	$	5,950,496	$	5,985,477	Total	$	32,755	$	5,530	$	23,905	$	62,190	$	7,389,074	$	7,451,264

December 31, 2020
NTM loans:
Single family residential mortgage		$	4,200	$	641	$	6,548	$	11,389	$	424,126	$	435,515

Other consumer		0		0		0		0		1,598		1,598
Total NTM loans		4,200		641		6,548		11,389		425,724		437,113
Traditional loans:
December 31, 2021														December 31, 2021
Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	67		0		4,284		4,351		2,083,957		2,088,308		Commercial and industrial	9,342		1,351		9,503		20,196		2,648,788		2,668,984
Commercial real estate	Commercial real estate	0		0		0		0		807,195		807,195		Commercial real estate	—		—		—		—		1,311,105		1,311,105
Multifamily	Multifamily	0		0		0		0		1,289,820		1,289,820		Multifamily	786		—		—		786		1,360,268		1,361,054
SBA	SBA	354		626		3,062		4,042		269,402		273,444		SBA	987		2,360		15,941		19,288		186,260		205,548
Construction	Construction	0		0		0		0		176,016		176,016		Construction	—		—		—		—		181,841		181,841

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	6,836		980		3,742		11,558		783,163		794,721		Single family residential mortgage	24,867		—		7,076		31,943		1,388,080		1,420,023
Other consumer	Other consumer	216		61		0		277		31,511		31,788		Other consumer	449		—		89		538		102,387		102,925
Total traditional loans		7,473		1,667		11,088		20,228		5,441,064		5,461,292

Total	Total	$	11,673	$	2,308	$	17,636	$	31,617	$	5,866,788	$	5,898,405	Total	$	36,431	$	3,711	$	32,609	$	72,751	$	7,178,729	$	7,251,480

~~In accordance with regulatory guidance, borrowers that are on forbearance or deferment, which were current prior to becoming affected by the global pandemic are not be reported as past due.~~

~~Table of Contents~~

Nonaccrual Loans

The following table presents nonaccrual loans as of the dates indicated:


		June 30, 2021								December 31, 2020									June 30, 2022				December 31, 2021
($ in thousands)	($ in thousands)	NTM Loans		Traditional Loans		Total Nonaccrual Loans		Nonaccrual Loans with no ACL		NTM Loans		Traditional Loans		Total Nonaccrual Loans		Nonaccrual Loans with no ACL		($ in thousands)	Total Nonaccrual Loans		Nonaccrual Loans with no ACL		Total Nonaccrual Loans		Nonaccrual Loans with no ACL
Nonaccrual loans	Nonaccrual loans																	Nonaccrual loans
Commercial:	Commercial:																	Commercial:
Commercial and industrial	Commercial and industrial	$	0	$	12,906	$	12,906	$	12,640	$	0	$	13,821	$	13,821	$	13,088	Commercial and industrial	$	25,380	$	6,413	$	28,594	$	9,137
Commercial real estate	Commercial real estate	0		6,553		6,553		5,412		0		4,654		4,654		4,654		Commercial real estate	893		893		—		—

SBA	SBA	0		10,633		10,633		2,667		0		3,749		3,749		648		SBA	10,537		5,163		16,653		11,443

Consumer:	Consumer:																	Consumer:
Single family residential mortgage	Single family residential mortgage	9,238		11,969		21,207		18,677		8,697		4,822		13,519		13,519		Single family residential mortgage	7,341		3,412		7,076		7,076

Other consumer	Other consumer	0		0		0		0		0		157		157		157		Other consumer	292		292		235		235
Total nonaccrual loans	Total nonaccrual loans	$	9,238	$	42,061	$	51,299	$	39,396	$	8,697	$	27,203	$	35,900	$	32,066	Total nonaccrual loans	$	44,443	$	16,173	$	52,558	$	27,891

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were ~~0 and $728 thousand of~~no loans that were past due 90 days or more and still accruing.

~~The non-traditional mortgage (“NTM”) loans on nonaccrual status included $5.9 million~~

Table of ~~Green Loans and $3.4 million of Interest Only loans at June 30, 2021 compared to $4.0 million of Green Loans and $4.7 million of Interest Only loans at December 31, 2020.~~Conte nts

Other Real Estate Owned, Net and Loans in Process of Foreclosure

At June 30, 2022 and December 31, 2021, there was no other real estate~~owned consisted of one SFR property, totaling $3.3 million.~~

owned. At June 30, ~~2021 and December 31, 2020,~~2022, there ~~was 0~~were 4 consumer mortgage ~~loan~~loans totaling $4.5 million secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction. There were no consumer mortgage loans secured by residential real estate properties in foreclosure at December 31, 2021.

Allowance for Credit Losses

The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables (MEVs) released by ~~our~~the model provider during June ~~2021. In contrast to the March 2021~~2022. The published forecasts ~~the assumptions in the June 2021 forecasts generally reflect a more favorable view of the economy (i.e.~~consider rising inflation, higher GDP growth rates and lower unemployment rates). While the June 2021 forecasts reflect an improving economy with the rollout of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variantsoil prices, ongoing supply chain issues and the ~~ultimate pace of the recovery. Accordingly, our economic assumptions~~military conflict between Russia and ~~the resulting ACL level and provision reversal consider both the positive assumptions and potential uncertainties.~~ Ukraine, among other factors.

The ACL also ~~incorporated~~incorporates qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by the third-party model including underlying strengths and weaknesses in various segments of the loan portfolio. As is the case with all estimates, the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, underlying model assumptions, and asset quality metrics, all of which may be better than or worse than current estimates.

The ACL process involves subjective and complex judgments as well as adjustments for numerous factors including those described in the federal banking agencies' joint interagency policy statement on ALL, which include underwriting experience and collateral value changes, among others.

We have established credit risk management processes that include regular management review of the loan portfolio to identify problem loans. During the ordinary course of business, management may become aware of borrowers who may not be able to fulfill their contractual payment requirements within the loan agreements. Such loans are subject to increased monitoring. Consideration is given to placing these loans on nonaccrual status, assessing the need for additional allowance for loan loss, and partially or fully charging off the principal balance. We maintain the allowance for loan losses at a level that is considered adequate to cover the current expected credit losses in the loan portfolio.

~~Table of Contents~~

The reserve for unfunded loan commitments is established to cover the current expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the reserve for unfunded loan commitments was ~~$3.8~~$5.9 million and ~~$3.2~~$5.6 million, respectively, and was included in accrued expenses and other liabilities on the consolidated statements of financial condition.

The credit risk monitoring system is designed to identify impaired and potential problem loans, perform periodic evaluation of impairment, and determine the adequacy of the allowance for credit losses in a timely manner. In addition, management has adopted a credit policy that includes a credit review and control system that it believes should be effective in ensuring that we maintain an adequate allowance for credit losses. Further, the Board of Directors provides oversight and guidance for management’s allowance evaluation process.

~~The~~ following table presents a summary of activity in the ACL for the periods indicated:

Three Months Ended June 30,
($ in thousands) 2021 2020
Allowance
for
Loan Losses Reserve for Unfunded Loan Commitments Allowance
for
Credit Losses Allowance
for
Loan Losses Reserve for Unfunded Loan Commitments Allowance
for
Credit Losses
Balance at beginning of period $ 79,353 $ 3,360 $ 82,713 $ 78,243 $ 3,888 $ 82,131
Loans charged off (886) 0 (886) 0 0 0
Recoveries of loans previously charged off 26 0 26 608 0 608
Net (charge-offs) recoveries (860) 0 (860) 608 0 608
(Reversal of) provision for credit losses (2,608) 454 (2,154) 11,519 307 11,826
Balance at end of period $ 75,885 $ 3,814 $ 79,699 $ 90,370 $ 4,195 $ 94,565


		Six Months Ended June 30,												Three Months Ended June 30,
($ in thousands)	($ in thousands)	2021						2020							($ in thousands)	2022						2021
		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses				Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses
Balance at beginning of period	Balance at beginning of period	$	81,030	$	3,183	$	84,213	$	57,649	$	4,064	$	61,713		Balance at beginning of period	$	93,226	$	5,405	$	98,631	$	79,353	$	3,360	$	82,713
Impact of adopting ASU 2016-13		0		0		0		7,609		(1,226)		6,383
Loans charged off		(1,451)		0		(1,451)		(2,076)		0		(2,076)
Recoveries of loans previously charged off		198		0		198		958		0		958
Net charge-offs		(1,253)		0		(1,253)		(1,118)		0		(1,118)

Charge-offs															Charge-offs	(494)		—		(494)		(886)		—		(886)
Recoveries															Recoveries	1,561		—		1,561		26		—		26
Net recoveries (charge-offs)															Net recoveries (charge-offs)	1,067		—		1,067		(860)		—		(860)

(Reversal of) provision for credit losses	(Reversal of) provision for credit losses	(3,892)		631		(3,261)		26,230		1,357		27,587			(Reversal of) provision for credit losses	(500)		500		—		(2,608)		454		(2,154)
Balance at end of period	Balance at end of period	$	75,885	$	3,814	$	79,699	$	90,370	$	4,195	$	94,565		Balance at end of period	$	93,793	$	5,905	$	99,698	$	75,885	$	3,814	$	79,699

Table of Conte nts


	Six Months Ended June 30,
($ in thousands)	2022						2021
	Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses
Balance at beginning of period	$	92,584	$	5,605	$	98,189	$	81,030	$	3,183	$	84,213

Charge-offs	(725)		—		(725)		(1,451)		—		(1,451)
Recoveries	33,776		—		33,776		198		—		198
Net charge-offs	33,051		—		33,051		(1,253)		—		(1,253)

(Reversal of) provision for credit losses	(31,842)		300		(31,542)		(3,892)		631		(3,261)
Balance at end of period	$	93,793	$	5,905	$	99,698	$	75,885	$	3,814	$	79,699

During the six months ended June 30, 2022, total recoveries included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019. This recovery resulted in a reversal of provision for credit losses during the same period.

Table of ~~Contents~~Conte nts

Accrued interest receivable on loans receivable, net totaled ~~$23.4~~$26.6 million and ~~$24.7~~$25.8 million at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the estimate of expected credit losses.

The following table presents the activity and balance in the ALL and the recorded investment, excluding accrued interest, in loans as of or for the three and six months ended June 30, ~~2021:~~2022:

($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Single Family Residential Mortgage Other Consumer Total
ALL:
Three Months Ended June 30, 2021:
Balance at March 31, 2021 $ 19,703 $ 17,100 $ 23,884 $ 3,451 $ 5,552 $ 9,161 $ 502 $ 79,353
Charge-offs (500) 0 0 (386) 0 0 0 (886)
Recoveries 23 0 0 3 0 0 0 26
Net charge-offs (477) 0 0 (383) 0 0 0 (860)
(Reversal of) provision for credit losses 930 (676) (2,481) 628 (818) (53) (138) (2,608)
Balance at June 30, 2021 $ 20,156 $ 16,424 $ 21,403 $ 3,696 $ 4,734 $ 9,108 $ 364 $ 75,885
Six Months Ended June 30, 2021:
Balance at December 31, 2020 $ 20,608 $ 19,074 $ 22,512 $ 3,145 $ 5,849 $ 9,191 $ 651 $ 81,030
Charge-offs (1,065) 0 0 (386) 0 0 0 (1,451)
Recoveries 68 0 0 129 0 0 1 198
Net (charge-offs) recoveries (997) 0 0 (257) 0 0 1 (1,253)
Provision for (reversal of) credit losses 545 (2,650) (1,109) 808 (1,115) (83) (288) (3,892)
Balance at June 30, 2021 $ 20,156 $ 16,424 $ 21,403 $ 3,696 $ 4,734 $ 9,108 $ 364 $ 75,885


($ in thousands)	Commercial and Industrial		Commercial Real Estate		Multifamily		SBA		Construction		Single Family Residential Mortgage		Other Consumer		Total
ALL:
Three Months Ended June 30, 2022:
Balance at March 31, 2022	$	39,967	$	16,490	$	15,337	$	3,041	$	6,268	$	11,029	$	1,094	$	93,226

Charge-offs	(138)		—		—		(139)		—		—		(217)		(494)
Recoveries	1,400		—		—		3		—		154		4		1,561
Net recoveries (charge-offs)	1,262		—		—		(136)		—		154		(213)		1,067

Provision for (reversal of) credit losses - loans	184		(748)		341		128		(2,013)		1,622		(14)		(500)
Balance at June 30, 2022	$	41,413	$	15,742	$	15,678	$	3,033	$	4,255	$	12,805	$	867	$	93,793

Six Months Ended June 30, 2022:
Balance at December 31, 2021	$	33,557	$	21,727	$	17,893	$	3,017	$	5,622	$	9,608	$	1,160	$	92,584

Charge-offs	(320)		—		—		(152)		—		(10)		(243)		(725)
Recoveries	32,817		—		—		761		—		192		6		33,776
Net recoveries (charge-offs)	32,497		—		—		609		—		182		(237)		33,051

Provision for (reversal of) credit losses - loans	(24,641)		(5,985)		(2,215)		(593)		(1,367)		3,015		(56)		(31,842)
Balance at June 30, 2022	$	41,413	$	15,742	$	15,678	$	3,033	$	4,255	$	12,805	$	867	$	93,793

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The following table presents the activity and balance in the ALL and the recorded investment, excluding accrued interest, in loans as of or for the three and six months ended June 30, ~~2020:~~2021:

($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Single Family Residential Mortgage Other Consumer Total
ALL:
Three Months Ended June 30, 2020:
Balance at March 31, 2020 $ 23,573 $ 13,620 $ 20,072 $ 3,652 $ 7,052 $ 9,593 $ 681 $ 78,243
Charge-offs 0 0 0 0 0 0 0 0
Recoveries 119 0 0 0 0 488 1 608
Net recoveries 119 0 0 0 0 488 1 608
Provision for (reversal of) credit losses 2,926 3,752 5,033 532 (377) (416) 69 11,519
Balance at June 30, 2020 $ 26,618 $ 17,372 $ 25,105 $ 4,184 $ 6,675 $ 9,665 $ 751 $ 90,370
Six Months Ended June 30, 2020:
Balance at December 31, 2019 $ 22,353 $ 5,941 $ 11,405 $ 3,120 $ 3,906 $ 10,486 $ 438 $ 57,649
Adoption of ASU No. 2016-13 662 4,847 1,809 388 103 (420) 220 7,609
Charge-offs (1,164) 0 0 (356) 0 (552) (4) (2,076)
Recoveries 149 0 0 121 0 639 49 958
Net (charge-offs) recoveries (1,015) 0 0 (235) 0 87 45 (1,118)
Provision for (reversal of) credit losses 4,618 6,584 11,891 911 2,666 (488) 48 26,230
Balance at June 30, 2020 $ 26,618 $ 17,372 $ 25,105 $ 4,184 $ 6,675 $ 9,665 $ 751 $ 90,370


($ in thousands)	Commercial and Industrial		Commercial Real Estate		Multifamily		SBA		Construction		Single Family Residential Mortgage		Other Consumer		Total
ALL:
Three Months Ended June 30, 2021:
Balance at March 31, 2021	$	19,703	$	17,100	$	23,884	$	3,451	$	5,552	$	9,161	$	502	$	79,353

Charge-offs	(500)		—		—		(386)		—		—		—		(886)
Recoveries	23		—		—		3		—		—		—		26
Net (charge-offs) recoveries	(477)		—		—		(383)		—		—		—		(860)

(Reversal of) provision for credit losses - loans	930		(676)		(2,481)		628		(818)		(53)		(138)		(2,608)
Balance at June 30, 2021	$	20,156	$	16,424	$	21,403	$	3,696	$	4,734	$	9,108	$	364	$	75,885

Six Months Ended June 30, 2021:
Balance at December 31, 2020	$	20,608	$	19,074	$	22,512	$	3,145	$	5,849	$	9,191	$	651	$	81,030

Charge-offs	(1,065)		—		—		(386)		—		—		—		(1,451)
Recoveries	68		—		—		129		—		—		1		198
Net (charge-offs) recoveries	(997)		—		—		(257)		—		—		1		(1,253)

Provision for (reversal of) credit losses - loans	545		(2,650)		(1,109)		808		(1,115)		(83)		(288)		(3,892)
Balance at June 30, 2021	$	20,156	$	16,424	$	21,403	$	3,696	$	4,734	$	9,108	$	364	$	75,885

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Collateral Dependent Loans

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are evaluated individually and the ACL is determined based on the amount by which amortized costs exceed the estimated fair value of the collateral, adjusted for estimated selling costs.

Collateral dependent loans consisted of the following as of ~~June 30, 2021 and December 31, 2020:~~the dates indicated:


		June 30, 2021									June 30, 2022
		Real Estate									Real Estate
($ in thousands)	($ in thousands)	Commercial		Residential		Business Assets		Total		($ in thousands)	Commercial		Residential		Business Assets		Automobile		Total
Commercial:	Commercial:									Commercial:
Commercial and industrial	Commercial and industrial	5,245		0		4,798		10,043		Commercial and industrial	$	12,349	$	—	$	4,316	$	—	$	16,665
Commercial real estate	Commercial real estate	3,482		1,930		0		5,412		Commercial real estate	893		—		—		—		893

SBA	SBA	72		4,461		5,901		10,434		SBA	98		4,710		5,729		—		10,537

Consumer:	Consumer:									Consumer:
Single family residential mortgage	Single family residential mortgage	0		26,870		0		26,870		Single family residential mortgage	—		8,789		—		—		8,789

Other consumer										Other consumer	—		184		—		111		295
Total loans	Total loans	$	8,799	$	33,261	$	10,699	$	52,759	Total loans	$	13,340	$	13,683	$	10,045	$	111	$	37,179


		December 31, 2020									December 31, 2021
		Real Estate									Real Estate
($ in thousands)	($ in thousands)	Commercial		Residential		Business Assets		Total		($ in thousands)	Commercial		Residential		Business Assets		Automobile		Total
Commercial:	Commercial:									Commercial:
Commercial and industrial	Commercial and industrial	5,492		0		4,965		10,457		Commercial and industrial	$	13,518	$	37	$	4,776	$	—	$	18,331
Commercial real estate		2,644		2,010		0		4,654

SBA	SBA	349		497		2,750		3,596		SBA	689		4,458		11,511		—		16,658

Consumer:	Consumer:									Consumer:
Single family residential mortgage	Single family residential mortgage	0		17,820		0		17,820		Single family residential mortgage	—		14,012		—		—		14,012
Other consumer	Other consumer	0		157		0		157		Other consumer	—		—		—		235		235
Total loans	Total loans	$	8,485	$	20,484	$	7,715	$	36,684	Total loans	$	14,207	$	18,507	$	16,287	$	235	$	49,236

Troubled Debt Restructurings

TDR loans consisted of the following as of the dates indicated:


		June 30, 2021						December 31, 2020
($ in thousands)	($ in thousands)	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total		($ in thousands)	June 30, 2022		December 31, 2021

Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	$	0	$	3,220	$	3,220	$	0	$	3,884	$	3,884	Commercial and industrial	$	19,778	$	5,241
Commercial real estate														Commercial real estate	4,187		4,243
SBA	SBA	0		265		265		0		265		265		SBA	522		265
Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	3,435		2,229		5,664		2,631		2,217		4,848		Single family residential mortgage	1,448		6,935

Other consumer		0		0		0		0		0		0

Total	Total	$	3,435	$	5,714	$	9,149	$	2,631	$	6,366	$	8,997	Total	$	25,935	$	16,684

We had commitments to lend to customers with outstanding loans that were classified as TDRs of $769 thousand and $63 thousand at ~~both~~ June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Accruing TDRs were ~~$6.0~~$10.9 million and nonaccrual TDRs were ~~$3.1~~$15.0 million at June 30, ~~2021,~~2022, compared to accruing TDRs of ~~$4.7~~$12.5 million and nonaccrual TDRs of ~~$4.3~~$4.1 million at December 31, ~~2020.~~2021. The increase in TDRs during the six months ended June 30, 2022 was due mostly to the modification of a non-performing PCD loan acquired in the PMB acquisition.

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The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:


		Three Months Ended					Six Months Ended						Three Months Ended					Six Months Ended
($ in thousands)	($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
June 30, 2022												June 30, 2022
Commercial:												Commercial:
Commercial and industrial(1)												Commercial and industrial(1)	—	$	—	$	—	1	$	12,840	$	12,840
SBA												SBA	2	833		833		2	833		833

Total												Total	2	$	833	$	833	3	$	13,673	$	13,673

June 30, 2021	June 30, 2021											June 30, 2021

Consumer:	Consumer:											Consumer:
Single family residential mortgage		0	$	0	$	0	1	1,800		1,800

Single family residential mortgage(1)												Single family residential mortgage(1)	—	$	—	$	—	1	$	1,800	$	1,800
Total	Total	0	0		0		1	$	1,800	$	1,800	Total	—	$	—	$	—	1	$	1,800	$	1,800
June 30, 2020
Commercial:
Commercial and industrial		0	$	0	$	0	1	$	5,000	$	5,000

Total		0	$	0	$	0	1	$	5,000	$	5,000

(1) Modifications during the three and six months ended June 30, 2022 and 2021 consisted of extensions of maturity.

We consider a TDR to be in payment default once it becomes 30 days or more past due following a modification. During the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, there were 0no loans that were modified as a TDR during the past 12 months that had subsequent payment defaults.

~~The following table summarizes TDRs by modification type for the period indicated:~~

Six Months Ended
Modification Type
Extension of Maturity Total
($ in thousands) Count Amount Count Amount
June 30, 2021
Consumer:
Single family residential mortgage 1 1,800 1 1,800
Total 1 $ 1,800 1 $ 1,800
June 30, 2020
Commercial:
Commercial and industrial 1 $ 5,000 1 $ 5,000
Total 1 $ 5,000 1 $ 5,000

Purchases, Sales, and Transfers

From time to time, we purchase and sell loans in the secondary market. During the three and six months ended June 30, ~~2021~~2022, we purchased loans aggregating ~~$233.1~~$277.2 million and ~~$366.0~~$641.5 million. During the three and six months ended June 30, ~~2020,~~2021, we purchased loans aggregating ~~$25.8~~$233.1 million and $366.0 million.

There were 0no loans transferred from ~~(to)~~held for investment to loans held-for-sale and there were 0no sales of loans for the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

Non-Traditional Mortgage Loans (“NTM”)

~~Our~~ NTM loans are included in our SFR mortgage portfolio ~~includes 3~~and are comprised of interest only loans and Green Loans. As of June 30, 2022 and December 31, 2021, the NTM loans totaled $841.1 million, or 11.3% of total loans, and $635.3 million, or 8.8% of total loans, respectively.

We no longer originate SFR loans, however we have and may continue to purchase pools of loans that include NTM loans such as interest only loans with maturities of up to 40 years and flexible initial repricing dates, ranging from 1 to 10 years, and periodic repricing dates through the life of the loan. Interest only loans are primarily SFR first mortgage loans that generally have a 30 to 40-year term at the time of origination and include payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At June 30, 2022 and December 31, 2021, interest only loans totaled $833.6 million and $613.3 million. Green Loans are SFR first and second mortgage lines of credit with a linked checking account that allows all types of ~~interest-only loans:~~deposits and withdrawals to be performed. Green Loans ~~Interest Only~~are generally interest only for a 15-year term with a balloon payment due at maturity. At June 30, 2022 and December 31, 2021, Green Loans totaled $7.4 million and $21.9 million.

At June 30, 2022 and December 31, 2021, nonperforming NTM loans totaled zero and ~~a small number of loans with the potential for negative amortization. The initial~~$4.0 million.

Non-Traditional Mortgage Performance Indicators

Our risk management policy and credit ~~guidelines for~~monitoring include reviewing delinquency, FICO scores, and LTV ratios on the NTM ~~portfolio were established based on the borrower's Fair Isaac Corporation (“FICO”) score, LTV ratio, property type, occupancy type,~~ loan ~~amount, and geography. Additionally, from an ongoing credit risk management perspective, we~~portfolio. We also continuously monitor market conditions for our geographic lending areas. We have determined that the most significant performance indicators for ~~NTMs~~NTM first lien loans are LTV ratios and for Green Loans are FICO scores. ~~We review the~~At June 30, 2022, our NTM ~~loan~~first lien portfolio ~~periodically by refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models ("AVMs") to confirm collateral~~had a weighted average LTV of approximately 60%.

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~~values. We no longer originate NTM loans, however, loans may be purchased which meet the criteria to be considered NTM loans.~~

~~The following table presents the composition of the NTM portfolio, which are included in the single family residential mortgage portfolio, as of the dates indicated:~~

June 30, 2021 December 31, 2020
($ in thousands) Count Amount Percent Count Amount Percent
Consumer:
Single family residential mortgage:
Green Loans (HELOC) - first liens 42 $ 28,796 6.2 % 48 $ 31,587 7.2 %
Interest Only - first liens 290 430,488 93.1 % 283 401,640 91.9 %
Negative amortization 5 1,690 0.4 % 8 2,288 0.5 %
Total NTM - first liens 337 460,974 99.7 % 339 435,515 99.6 %
Other consumer:
Green Loans (HELOC) - second liens 5 1,601 0.3 % 5 1,598 0.4 %
Total NTM - second liens 5 1,601 0.3 % 5 1,598 0.4 %
Total NTM loans 342 $ 462,575 100.0 % 344 $ 437,113 100.0 %
Total loans receivable $ 5,985,477 $ 5,898,405
% of total NTM loans to total loans receivable 7.7 % 7.4 %

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had goodwill of ~~$37.1~~$95.1 million and $94.3 million. We evaluate goodwill for impairment as of October 1st each year, and more frequently if events or circumstances indicate that there may be impairment. We completed our most recent annual goodwill impairment test as of October 1, ~~2020~~2021 and determined that 0no goodwill impairment existed.

The following table presents changes in the carrying amount of goodwill for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2022		2021		2022		2021
Goodwill, beginning of period	$	95,127	$	37,144	$	94,301	$	37,144

Goodwill adjustments for purchase accounting	—		—		826		—


Goodwill, end of period	$	95,127	$	37,144	$	95,127	$	37,144
Accumulated impairment losses at end of period	$	2,100	$	2,100	$	2,100	$	2,100

During the six months ended June 30, 2022, goodwill was adjusted for fair value and deferred tax adjustments related to the PMB acquisition.

Core deposit intangibles are amortized over their useful lives ~~ranging from~~ ~~four~~ to of ten ~~years.~~ years and reviewed for impairment at least quarterly. As of June 30, ~~2021,~~2022, the weighted average remaining amortization period for core deposit intangibles was approximately ~~3.3~~7.6 years.

($ in thousands) Gross Carrying Value Accumulated Amortization Net Carrying Value
June 30, 2021
Core deposit intangibles $ 30,904 $ 28,835 $ 2,069
December 31, 2020
Core deposit intangibles $ 30,904 $ 28,271 $ 2,633
The following table presents changes in the carrying amount of intangible assets, net for the periods indicated:

Aggregate amortization of intangible assets was $282 thousand and $430 thousand for the three months ended June 30, 2021 and 2020 and $564 thousand and $859 thousand for the six months ended June 30, 2021 and 2020.


	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2022		2021		2022		2021
Core deposit intangibles:
Balance, beginning of period	$	34,978	$	30,904	$	35,958	$	30,904

Core deposit intangible adjustments for purchase accounting	—		—		(980)		—
Balance, end of period	34,978		30,904		34,978		30,904
Accumulated amortization:
Balance, beginning of period	29,988		28,553		29,547		28,271
Amortization of intangible assets	313		282		754		564
Balance, end of period	30,301		28,835		30,301		28,835
Intangible assets, net	$	4,677	$	2,069	$	4,677	$	2,069

The following table presents estimated future amortization ~~expenses~~expense of intangible assets, net as of June 30, ~~2021:~~2022:


($ in thousands)	($ in thousands)	Remainder of 2021		2022		2023		2024		Total		($ in thousands)	Remainder of 2022		2023		2024		2025		2026		2027 and After		Total
Estimated future amortization expense	Estimated future amortization expense	$	518	$	799	$	517	$	235	$	2,069	Estimated future amortization expense	$	745	$	1,092	$	719	$	420	$	373	$	1,328	$	4,677

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NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

FHLB Advances

The following table presents advances from the FHLB as of the dates indicated:


($ in thousands)	($ in thousands)	June 30, 2021			December 31, 2020			($ in thousands)	June 30, 2022			December 31, 2021
Fixed rate:	Fixed rate:							Fixed rate:
Outstanding balance ~~(2)~~(1)	Outstanding balance ~~(2)~~(1)	$	411,000		$	461,000		Outstanding balance ~~(2)~~(1)	$	411,000		$	411,000
Interest rates ranging from ~~(2)~~	Interest rates ranging from ~~(2)~~	0.64		%	0		%	Interest rates ranging from ~~(2)~~	0.64		%	0.64		%
Interest rates ranging to	Interest rates ranging to	3.32		%	3.32		%	Interest rates ranging to	3.32		%	3.32		%
Weighted average interest rate	Weighted average interest rate	2.53		%	2.51		%	Weighted average interest rate	2.53		%	2.53		%
Variable rate:	Variable rate:							Variable rate:
Outstanding balance	Outstanding balance	$	85,000		$	85,000		Outstanding balance	$	105,000		$	70,000
Weighted average interest rate	Weighted average interest rate	0.15		%	0.17		%	Weighted average interest rate	1.64		%	0.20		%

(1)Excludes ~~$5.6~~$4.3 million and ~~$6.2~~$4.9 million of unamortized debt issuance costs at June 30, ~~2021~~2022 and December 31, ~~2020.~~

~~(2)Includes 0 and $5.0 million in FHLB recovery advances at June 30, 2021 and December 31, 2020 with an interest rate of 0.00% that matured of May 27,~~ 2021.

Each advance is payable at its maturity date. Advances paid early are subject to a prepayment penalty. ~~At the end~~As of ~~the second quarter of 2021,~~June 30, 2022, FHLB advances included ~~$85.0~~$105.0 million in overnight borrowings with a weighted average interest rate of 1.64% and $411.0 million in term advances with a weighted average life of ~~4.5~~3.5 years and weighted average interest rate of 2.53%.

AtInvestments securities with carrying value of $205.5 million as of June 30, ~~2021 and December 31, 2020, the~~2022 were pledged to secure FHLB advances. The Bank’s advances from the FHLB ~~were~~are also collateralized by ~~certain~~a blanket lien on all real estate loans. Our secured borrowing capacity with the FHLB totaled $1.76 billion, of which the Bank was eligible to borrow an additional $985.4 million at June 30, 2022 based on qualifying loans with an aggregate unpaid principal balance of ~~$2.06~~$2.38 billion ~~and $2.37 billion. Based on this collateral, the Bank was eligible to borrow an additional $753.7 million at June 30, 2021.~~as of that date.

The Bank’s investment in capital stock of the FHLB of San Francisco totaled $17.3 million at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

FRB Borrowings

At June 30, ~~2021,~~2022, the ~~Company~~Bank had borrowing capacity with the Federal Reserve Bank of San Francisco ~~(“Federal~~(the “Federal Reserve”) of ~~$269.5~~$789.0 million, including the secured borrowing capacity through the Federal Reserve Discount Window and Borrower-in-Custody ("BIC") program. At June 30, ~~2021,~~2022, the Bank has pledged certain qualifying loans with an unpaid principal balance of ~~$553.1 million~~$1.01 billion and securities with a carrying value of ~~$8.9~~$123.2 million as collateral for these lines of credit. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were 0no secured borrowings from the FRB at June 30, 2022 and December 31, 2021

There were no borrowings under this arrangement for the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

The Bank’s investment in capital stock of the Federal Reserve totaled ~~$27.2~~$34.2 million and $27.3 million at June 30, ~~2021~~2022 and December 31, ~~2020~~2021.

Other Borrowings

The Bank maintained available unsecured federal funds lines with 5 correspondent banks totaling $210.0 million, with 0no outstanding borrowings at June 30, ~~2021.~~2022. The Bank also has the ability to ~~perform~~access unsecured overnight ~~borrowing~~borrowings from various financial institutions through the American Financial Exchange platform ~~(AFX)~~("AFX"). The availability of such unsecured borrowings fluctuates regularly and are subject to the counterparties discretion and totaled ~~$441.0 million and $196.0~~$445.0 million at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Borrowings under the AFX totaled ~~$125.0~~$85.0 million and 0$25.0 million at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

In December 2021, the holding company entered into a $50.0 million revolving line of credit, which matures on December 19, 2022. There were $13.0 million and zero in borrowings under this line of credit at June 30, 2022 and December 31, 2021. At June 30, 2022, we were in compliance with all covenants under our revolving line of credit.

Table of Conte nts

The Bank also maintained repurchase agreements and had 0no outstanding securities sold under agreements to repurchase at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and the pledging of additional investment securities.

~~Table of Contents~~

NOTE 7 – LONG-TERM DEBT

The following table presents our long-term debt as of the dates indicated:


		June 30, 2021				December 31, 2020							June 30, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Par Value		Unamortized Debt Issuance Cost and Discount		Par Value		Unamortized Debt Issuance Cost and Discount		($ in thousands)	Interest Rate	Maturity Date	Par Value		Unamortized Debt Issuance Cost and Discount		Par Value		Unamortized Debt Issuance Cost and Discount
5.25% senior notes due April 15, 2025		$	175,000	$	(1,193)	$	175,000	$	(1,291)
4.375% subordinated notes due October 30, 2030		85,000		(2,253)		85,000		(2,394)
Senior notes										Senior notes	5.25%	4/15/2025	$	175,000	$	(910)	$	175,000	$	(1,014)
Subordinated notes										Subordinated notes	4.375%	10/30/2030	85,000		(2,030)		85,000		(2,127)
PMB Statutory Trust III, junior subordinated debentures										PMB Statutory Trust III, junior subordinated debentures	Libor + 3.40%	9/26/2032	7,217		—		7,217		—
PMB Capital Trust III, junior subordinated debentures										PMB Capital Trust III, junior subordinated debentures	Libor + 2.00%	10/8/2034	10,310		—		10,310		—
Total	Total	$	260,000	$	(3,446)	$	260,000	$	(3,685)	Total			$	277,527	$	(2,940)	$	277,527	$	(3,141)

At June 30, ~~2021,~~2022, we were in compliance with all covenants under our long-term debt agreements.

NOTE 8 – INCOME TAXES

For the three and six months ended June 30, 2022, income tax expense was $10.2 million and $28.9 million, resulting in an effective tax rate of 27.6% and 27.8%. For the three and six months ended June 30, 2021, income tax expense was $6.6 million and $8.9 million, resulting in an effective tax rate of 25.6% and 20.9%. ~~For~~The effective tax rate for the three and six months ended June 30, ~~2020, income~~2022 and for the three months ended June 30, 2021, differs from the combined federal and state statutory rate for the consolidated company of 28.9% due primarily to various permanent tax ~~benefit was $5.3 million~~differences, tax credits and ~~$7.5 million and the~~other discrete tax items that impact our effective tax ~~rate was 22.3% and 23.0%.~~rate. For the six months ended June 30, 2021, ~~income~~the effective tax ~~expense included a~~rate differs from the 28.9% combined federal and state statutory rate due primarily to the net tax benefit ~~resulting~~of $2.6 million from share-based awards, including the exercise of all previously issued outstanding stock appreciation rights ~~of $2.1 million~~ in the first ~~quarter. The~~quarter of 2021 in addition to the various permanent tax differences, tax credits and other discrete tax items that impact our effective tax ~~rate is expected to be in the 25% to 27% range for the remaining quarters in 2021.~~rate.

We account for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and the tax basis of ~~its~~our assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies. Based on this analysis, management determined, it was more likely than not, that all of the deferred tax assets would be realized; therefore, 0no valuation allowance was provided against the net deferred tax assets of ~~$41.6~~$54.5 million and ~~$46.0~~$50.8 million at June 30, ~~2021~~2022 and December 31, ~~2020, respectively.~~2021.

ASC 740-10-25 relates to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10-25 prescribes a threshold and a measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We had unrecognized tax benefits of ~~$984~~$955 thousand and ~~$924~~$925 thousand at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. We do not believe that the unrecognized tax benefits will change materially in the next twelve months. As of June 30, ~~2021,~~2022, the total unrecognized tax benefit that, if recognized, would impact the effective tax rate was ~~$754~~$725 thousand.

At June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had 0no accrued interest or penalties. In the event we are assessed interest and/or penalties by federal or state tax authorities, such amounts will be classified in the consolidated financial statements as income tax expense.

Table of Conte nts

We are subject to U.S. federal income tax as well as income tax in multiple state jurisdictions. We are no longer subject to examination by U.S. federal taxing authorities for years before ~~2017.~~2018. The statute of limitations for the assessment of California franchise taxes has expired for tax years before ~~2014~~2017 (other state income and franchise tax statutes of limitations vary by state).

NOTE 9 – DERIVATIVE INSTRUMENTS

We use derivative instruments and other risk management techniques to reduce our exposure to adverse fluctuations in interest rates and foreign currency exchange rates in accordance with our risk management ~~policies.~~policies and to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans.

During the three and six months ended June 30, 2022, changes in fair value of interest rate swaps on loans and foreign exchange contracts were gains of $82 thousand and $185 thousand and were included in other income on the consolidated statements of operations. During the three and six months ended June 30, 2021, changes in fair value of interest rate swaps ~~and caps~~ on loans and foreign exchange contracts were ~~a loss~~losses of $71 thousand and ~~a gain~~gains of $200 ~~thousand, compared to losses of $107 thousand and $288 thousand for the three and six months endedJune 30, 2020, and were included in other income on the consolidated statements of operations.~~

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thousand.

The following table presents the notional amount and fair value of derivative instruments included in the consolidated statements of financial condition as of the dates indicated.


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Notional Amount		Fair Value(1)		Notional Amount		Fair Value(1)		($ in thousands)	Notional Amount		Fair Value(1)		Notional Amount		Fair Value(1)
Derivative assets:	Derivative assets:									Derivative assets:

Interest rate swaps and caps on loans		$	64,215	$	4,960	$	67,840	$	7,304
Interest rate swaps on loans										Interest rate swaps on loans	$	34,702	$	1,074	$	58,834	$	3,390
Foreign exchange contracts	Foreign exchange contracts	3,920		224		7,010		328		Foreign exchange contracts	5,511		186		4,725		175
Total	Total	$	68,135	$	5,184	$	74,850	$	7,632	Total	$	40,213	$	1,260	$	63,559	$	3,565
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:

Interest rate swaps and caps on loans		$	64,215	$	5,242	$	67,840	7,789
Interest rate swaps on loans										Interest rate swaps on loans	$	34,702	$	1,082	$	58,834	3,594

Foreign exchange contracts	Foreign exchange contracts	3,920		212		7,010		313		Foreign exchange contracts	5,511		168		4,725		146
Total	Total	$	68,135	$	5,454	$	74,850	$	8,102	Total	$	40,213	$	1,250	$	63,559	$	3,740

(1)The fair value of interest rate swaps ~~and caps~~ on loans and foreign exchange contracts are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated statements of financial condition.

We have entered into agreements with counterparty financial institutions, which include master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. We elect, however, to account for all derivatives with counterparty institutions on a gross basis.

NOTE 10 – EMPLOYEE STOCK COMPENSATION

On May 31, 2018, our stockholders approved the Company's 2018 Omnibus Stock Incentive Plan (“2018 Omnibus Plan”). The 2018 Omnibus Plan provides that the maximum number of shares available for awards is 4,417,882. As of June 30, ~~2021, 3,197,269~~2022, 2,169,018 shares were available for future awards.

Stock-based Compensation Expense

The following table presents total stock-based compensation expense and the related tax benefits for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Stock options		$	0	$	2	$	0	$	4

Restricted stock awards and units	Restricted stock awards and units	1,338		1,468		2,882		3,042		Restricted stock awards and units	$	1,482	$	1,338	$	2,767	$	2,882

Total share-based compensation expense		$	1,338	$	1,470	$	2,882	$	3,046

Related tax benefits	Related tax benefits	$	394	$	433	$	849	$	897	Related tax benefits	$	428	$	394	$	799	$	849

Table of Conte nts

Total stock-based compensation expense represents the cost of time-based and performance-based stock units and awards. At June 30, ~~2021,~~2022, unrecognized compensation expense related to restricted stock awards and restricted stock units totaled ~~$7.6~~$14.2 million and will be recognized over a weighted average remaining period of ~~2.3~~3.0 years.

Restricted Stock Awards and Restricted Stock Units

We ~~also~~ have granted restricted stock awards and restricted stock units to certain employees, officers, and directors. The restricted stock awards and units are valued at the closing price of our stock on the measurement date. The restricted stock awards and units fully vest after a specified period (generally ranging from one to five years) of continued service from the date of grant plus, in some cases, the satisfaction of performance conditions. These performance targets include conditions relating to our profitability, stock price and regulatory standing. The actual amounts of stock released upon vesting will be determined by the Compensation Committee of our Board of Directors upon the Committee's certification of the satisfaction of the target level of performance. We recognize an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock, generally upon vesting or, in the case of restricted stock units, when settled.

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The following table presents unvested restricted stock awards and restricted stock units activity for the three and six months ended June 30, ~~2021:~~2022:


		Three Months Ended June 30, 2021			Six Months Ended June 30, 2021				Three Months Ended June 30, 2022			Six Months Ended June 30, 2022
		Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share			Number of Shares	Weighted Average Grant Date Fair Value Per Share		Number of Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding at beginning of period	Outstanding at beginning of period	865,979	$	16.12	848,302	$	14.42	Outstanding at beginning of period	784,791	$	18.08	649,010	$	17.17
Granted (1)	Granted (1)	48,873	$	17.15	269,330	$	20.66	Granted (1)	750,615	$	11.52	1,021,182	$	13.65
Vested (2)	Vested (2)	(203,032)	$	12.87	(355,280)	$	13.70	Vested (2)	(122,738)	$	15.66	(239,319)	$	16.34
Forfeited (3)	Forfeited (3)	(14,732)	$	16.66	(65,264)	$	12.41	Forfeited (3)	(9,608)	$	19.31	(27,813)	$	17.28
Outstanding at end of period	Outstanding at end of period	697,088	$	17.13	697,088	$	17.13	Outstanding at end of period	1,403,060	$	14.77	1,403,060	$	14.77

(1)There were ~~2,916~~695,567 and ~~66,472~~764,692 performance-based shares/units included in shares granted for the three and six months ended June 30, ~~2021.~~2022.

(2)There were ~~8,218~~24,783 and ~~77,327~~24,783 performance-based shares/units included in vested shares for the three and six months ended June 30, ~~2021.~~2022.

(3)The number of forfeited shares ~~includes~~included aggregate performance-based shares/units of 0zero and ~~40,160~~9,428 for the three and six months ended June 30, ~~2021.~~2022.

Stock Options

~~We issued~~There were no stock options ~~to certain employees, officers,~~granted during the three and ~~directors. Stock~~six months ended June 30, 2022. There were no unvested stock options ~~are issued at the closing market price immediately before the grant date~~as of June 30, 2022 and ~~generally have a~~ ~~three~~ to ~~five~~ ~~year vesting period and contractual terms of~~ ~~seven~~ to ~~ten~~ years. We recognize an income tax deduction upon exercise of a stock option to the extent taxable income is recognized by the option holder. In the case of a non-qualified stock option, the option holder recognizes taxable income based on the fair market value of the shares acquired at the time of exercise less the exercise price.

December 31, 2021. The following ~~table~~tables represents stock option activity for the three months ended June 30, ~~2021:~~2022:


		Three Months Ended June 30, 2021							Three Months Ended June 30, 2022
($ in thousands except per share data)		Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value
($ in thousands, except per share data)								($ in thousands, except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value
Outstanding at beginning of period	Outstanding at beginning of period	14,904	$	13.05				Outstanding at beginning of period	14,904	$	13.05

Exercised	Exercised	0	$	0				Exercised	—	$	—

Outstanding at end of period	Outstanding at end of period	14,904	$	13.05	3.8 years	$	67	Outstanding at end of period	14,904	$	13.05	2.8 years	$	68
Exercisable at end of period	Exercisable at end of period	14,904	$	13.05	3.8 years	$	67	Exercisable at end of period	14,904	$	13.05	2.8 years	$	68

Table of Conte nts

The following table represents stock option activity for the six months ended June 30, ~~2021:~~2022:

Six Months Ended June 30, 2021
($ in thousands except per share data) Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contract Term Aggregated Intrinsic Value
Outstanding at beginning of period 55,069 $ 13.96
Exercised (40,165) $ 14.30
Outstanding at end of period 14,904 $ 13.05 3.8 years $ 67
Exercisable at end of period 14,904 $ 13.05 3.8 years $ 67

~~There were 0 unvested stock options as of June 30, 2021 and December 31, 2020.~~

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	Six Months Ended June 30, 2022
($ in thousands, except per share data)	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contract Term	Aggregated Intrinsic Value
Outstanding at beginning of period	14,904	$	13.05


Exercised	—	$	—


Outstanding at end of period	14,904	$	13.05	2.8 years	$	68
Exercisable at end of period	14,904	$	13.05	2.8 years	$	68

Stock Appreciation Rights

~~On August 21, 2012, we granted to the then, and now former, chief executive officer, a~~ ~~ten-year stock appreciation right (“SAR”), which were fully exercised during~~In the first quarter of 2021, all of our then outstanding stock appreciation rights (“SARs”) were fully exercised resulting in the issuance of 305,772 shares of voting common stock. In connection with the exercise of the SARs, we recognized a tax benefit of $2.1 million (refer to Note 8 - Income Taxes)~~. There are 0 further outstanding SARs. The following table represents SARs activity and~~ during the ~~weighted average exercise price per share as of and for the three and~~ six months ended June 30, ~~2021:~~2021. There are no further outstanding SARs.

Three Months Ended
June 30, 2021 Six Months Ended
June 30, 2021
($ in thousands except per share data) Number of Shares Weighted-Average Exercise Price Per Share Number of Shares Weighted-Average Exercise Price Per Share
Outstanding at beginning of period 0 $ 0 1,559,012 $ 11.60
Exercised 0 $ 0 (1,559,012) $ 11.60
Outstanding at end of period 0 $ 0 0 $ 0
Exercisable at end of period 0 $ 0 0 $ 0

NOTE 11 – STOCKHOLDERS’ EQUITY

Preferred Stock

We are authorized to issue 50,000,000 shares of preferred stock with par value of $0.01 per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but generally have no voting rights. All of our outstanding shares of preferred stock ~~have~~had a $1,000 per share liquidation preference.

The following table presents our total outstanding preferred stock as of the dates indicated:


		June 30, 2021					December 31, 2020						June 30, 2022					December 31, 2021
($ in thousands)	($ in thousands)	Shares Outstanding	Liquidation Preference		Carrying Value		Shares Outstanding	Liquidation Preference		Carrying Value		($ in thousands)	Shares Outstanding	Liquidation Preference		Carrying Value		Shares Outstanding	Liquidation Preference		Carrying Value

Series D 7.375% non-cumulative perpetual		0	$	0	$	0	93,270	$	93,270	$	89,922

Series E 7.00% non-cumulative perpetual	Series E 7.00% non-cumulative perpetual	98,702	98,702		94,956		98,702	98,702		94,956		Series E 7.00% non-cumulative perpetual	—	—		—		98,702	98,702		94,956
Total	Total	98,702	$	98,702	$	94,956	191,972	$	191,972	$	184,878	Total	—	$	—	$	—	98,702	$	98,702	$	94,956

During certain periods, we have repurchased Series D Depositary Shares and Series E Depositary Shares, each representing a 1/40th interest in a share of Series D Preferred Stock and Series E Preferred Stock. When the consideration paid to repurchase shares exceeds the repurchased shares' carrying value, the difference reduces net income allocated to common shareholders. When the consideration paid to repurchase shares is less than the repurchased shares' carrying value, the difference increases net income allocated to common shareholders. The following table summarizes redemptions and repurchases of these depositary shares for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2022		2021		2022		2021
Series D Preferred Stock:
Depositary shares repurchased	—		—		—		3,730,767
Preferred Stock retired (shares)	—		—		—		93,269

Consideration paid	$	—	$	—	$	—	$	93,269
Carrying value	—		—		—		89,922
Impact of preferred stock redemption	$	—	$	—	$	—	$	3,347

Series E Preferred Stock:
Depositary shares repurchased	—		—		3,948,080		—
Preferred Stock retired (shares)	—		—		98,702		—

Consideration paid	$	—	$	—	$	98,703	$	—
Carrying value	—		—		94,956		—
Impact of preferred stock redemption	$	—	$	—	$	3,747	$	—

Table of ~~Contents~~Conte nts

Three Months Ended
June 30, Six Months Ended
June 30,
($ in thousands) 2021 2020 2021 2020
Series D Preferred Stock:
Depositary shares repurchased 0 53,006 3,730,767 134,310
Preferred Stock retired (shares) 0 1,325 93,269 3,357
Consideration paid $ 0 $ 1,238 $ 93,269 $ 2,696
Carrying value — 1,278 89,922 3,237
Impact of preferred stock redemption $ 0 $ (40) $ 3,347 $ (541)
Series E Preferred Stock:
Depositary shares repurchased 0 57,065 0 64,465
Preferred Stock retired (shares) 0 1,427 0 1,612
Consideration paid $ 0 $ 1,363 $ 0 $ 1,516
Carrying value — 1,372 — 1,550
Impact of preferred stock redemption $ 0 $ (9) $ 0 $ (34)

During the first quarter of 2022, we redeemed all of our outstanding Series E Depositary Shares, resulting in an after-tax charge of $3.7 million in the accompanying consolidated statements of operations. During the first quarter of 2021, we ~~repurchased~~redeemed all of our outstanding Series D Depositary Shares, resulting in an ~~impact of preferred stock redemption~~after-tax charge of $3.3 million in the accompanying consolidated statements of operations.

Stock Repurchase Program

On March 15, 2022, we announced our Board of Directors authorized the repurchase of up to $75 million of our common stock. The repurchase authorization expires in March 2023. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions

During the three months ended June 30, 2022, common stock repurchased under the program totaled 2,113,176 shares at a weighted average price of $18.38. During the six months ended June 30, 2022, common stock repurchased under the program totaled 2,328,726 shares at a weighted average price of $18.52. As of June 30, 2022, the Company had $31.9 million remaining under the current stock repurchase authorization.

Change in Accumulated Other Comprehensive (Loss) Income ("AOCI")

Our AOCI includes unrealized gain (loss) on securities available-for-sale. Changes to AOCI are presented net of the tax effect as a component of stockholders' equity. Reclassifications from AOCI occur when a security is sold, called or matures and are recorded on the consolidated statements of operations either as a gain or loss. During the quarter ended March 31, 2022, we transferred certain AFS debt securities to HTM. The unrealized loss on such securities at the time of transfer continues to be reported in AOCI and is amortized over the remaining life of the security as a yield adjustment. The following table presents changes to AOCI for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Unrealized gain (loss) on securities available-for-sale
Balance at beginning of period	Balance at beginning of period	$	5,185	$	(54,148)	$	7,746	$	(11,900)	Balance at beginning of period	$	(19,172)	$	5,185	$	7,743	$	7,746
Unrealized gain (loss) arising during the period		13,550		56,701		9,912		(3,182)

Unrealized loss on securities available-for-sale:										Unrealized loss on securities available-for-sale:
Unrealized loss arising during the period										Unrealized loss arising during the period	(21,016)		13,550		(59,103)		9,912

Reclassification adjustment from other comprehensive income	Reclassification adjustment from other comprehensive income	0		(2,011)		0		(2,011)		Reclassification adjustment from other comprehensive income	—		—		(16)		—

Total unrealized loss on securities available-for-sale										Total unrealized loss on securities available-for-sale	(21,016)		13,550		(59,119)		9,912
Amortization of unrealized loss of available-for-sale securities transferred to held-to-maturity										Amortization of unrealized loss of available-for-sale securities transferred to held-to-maturity	246		—		333		—
Tax effect of current period changes	Tax effect of current period changes	(3,995)		(16,107)		(2,918)		1,528		Tax effect of current period changes	5,883		(3,995)		16,984		(2,918)
Total changes, net of taxes	Total changes, net of taxes	9,555		38,583		6,994		(3,665)		Total changes, net of taxes	(14,887)		9,555		(41,802)		6,994

Balance at end of period	Balance at end of period	$	14,740	$	(15,565)	$	14,740	$	(15,565)	Balance at end of period	$	(34,059)	$	14,740	$	(34,059)	$	14,740

NOTE 12 – VARIABLE INTEREST ENTITIES

We hold ownership interests in alternative energy partnerships and qualified affordable housing partnerships and have a variable interest in a multifamily securitization trust. We evaluate our interests in these entities to determine whether they meet the definition of a variable interest entity ("VIE") and whether we are required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest we hold could potentially be significant to the VIE, we consider both qualitative and quantitative factors regarding the nature, size, and form of our involvement with the VIE. We have determined that our interests in these entities meet the definition of variable ~~interests.~~interests; however none of the VIE's meet the criteria for consolidation.

3839

Table of ~~Contents~~Conte nts

Unconsolidated VIEs

Multifamily Securitization

During the third quarter of 2019, we transferred $573.5 million of multifamily loans, through a two-step process, to a third-party depositor which placed the multifamily loans into a third-party trust (a VIE) that issued structured pass-through certificates to investors. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860. We determined that we are not the primary beneficiary of this VIE as we do not have the power to direct the activities that will have the most significant economic impact on the ~~entity.~~entity, therefore we do not consolidate the securitization trust. Our continuing involvement in this securitization is limited to customary obligations associated with the securitization of loans, including the obligation to cure, repurchase, or substitute loans in the event of a material breach in representations. Additionally, we have the obligation to guarantee credit losses up to 12% of the aggregate unpaid principal balances at cut-off date of the securitization. This obligation is supported by a $68.8 million letter of credit between the Freddie Mac and the FHLB.

The maximum loss exposure that would be absorbed by us in the event that all of the assets in the securitization trust are deemed worthless is $68.8 million, which represents the aforementioned obligation to guarantee credit losses up to 12%. We believe that the loss exposure on the multifamily securitization is reduced by both loan-to-value ratios of the underlying collateral balances and the overcollateralization that exists within the securitization trust. At June 30, ~~2021,~~2022, we have a ~~$3.6~~$2.0 million repurchase reserve related to this VIE.

Alternative Energy Partnerships

We ~~invest~~invested in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits). These entities were formed to invest in newly established residential and commercial solar leases and power purchase agreements. As a result of our investments, we have the right to certain investment tax credits and tax depreciation benefits (recognized on the flow through income statement method in accordance with ASC 740), and to a lesser extent, cash flows generated from the installed solar systems leased to individual consumers for a fixed period of time. While our interest in the alternative energy partnerships meets the definition of a VIE in accordance with ASC 810, we have determined that we are not the primary beneficiary because we do not have the power to direct the activities that most significantly impact the economic performance of the entities including operational and credit risk management activities. As we are not the primary beneficiary, we did not consolidate the entities.

We use the Hypothetical Liquidation at Book Value ("HLBV") method to account for our investments in energy tax projects as an equity investment under ASC 970-323-25-17. Under the HLBV method, an equity method investor determines its share of an investee's net earnings by comparing its claim on the investee's book value at the beginning and end of the period, assuming the investee were to liquidate all assets at their U.S. GAAP amounts and distribute the resulting cash to creditors and investors under their respective priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is our share of the earnings or losses from the equity investment for the period. To account for the tax credits earned on investments in alternative energy partnerships, we use the flow-through income statement method. Under this method, the tax credits are recognized as a reduction to income tax expense and the initial book-tax differences in the basis of the investments are recognized as additional tax expense in the year they are earned. Investments in alternative energy partnerships totaled ~~$24.1~~$23.5 million and ~~$28.0~~$25.9 million at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The following table presents information regarding activity in our alternative energy partnerships for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Fundings	Fundings	$	0	$	0	$	0	$	3,631	Fundings	$	—	$	—	$	—	$	—
Cash distribution from investment	Cash distribution from investment	570		547		1,108		1,001		Cash distribution from investment	582		570		1,156		1,108

Gain (loss) on investments in alternative energy partnerships		829		167		(2,801)		(1,738)
(Loss) gain on investments in alternative energy partnerships										(Loss) gain on investments in alternative energy partnerships	(1,043)		829		(1,201)		(2,801)
Income tax credits recognized	Income tax credits recognized	0		0		0		0		Income tax credits recognized	—		—		—		—
Tax expense (benefit) recognized from HLBV application	Tax expense (benefit) recognized from HLBV application	228		38		(770)		(398)		Tax expense (benefit) recognized from HLBV application	(301)		228		(347)		(770)

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The following table represents the carrying value of the associated unconsolidated assets and liabilities and the associated maximum loss exposure for alternative energy partnerships as of the dates indicated:


($ in thousands)	($ in thousands)	June 30, 2021		December 31, 2020		($ in thousands)	June 30, 2022		December 31, 2021
Cash	Cash	$	2,503	$	3,228	Cash	$	2,367	$	4,227
Equipment, net of depreciation	Equipment, net of depreciation	236,952		241,015		Equipment, net of depreciation	242,097		246,421
Other assets	Other assets	8,116		7,470		Other assets	9,311		9,098
Total unconsolidated assets	Total unconsolidated assets	$	247,571	$	251,713	Total unconsolidated assets	$	253,775	$	259,746
Total unconsolidated liabilities	Total unconsolidated liabilities	$	6,186	$	6,357	Total unconsolidated liabilities	$	9,292	$	12,129

Maximum loss exposure	Maximum loss exposure	$	24,068	$	27,977	Maximum loss exposure	$	23,531	$	25,888

The maximum loss exposure that would be absorbed by us in the event that all of the assets in alternative energy partnerships are deemed worthless is ~~$24.1~~$23.5 million, which is our recorded investment amount at June 30, ~~2021.~~2022.

We believe that the loss exposure on our investments is reduced considering our return on our investment is provided not only by the cash flows of the underlying client leases and power purchase agreements, but also through the significant tax benefits, including the federal tax credit carryover that resulted from the investments. In addition, our exposure is further limited as the arrangements include a transition manager to support any transition of the solar company sponsor, whose role includes that of the servicer and operation and maintenance provider, in the event the sponsor would be required to be removed from its responsibilities (e.g., bankruptcy, breach of contract, etc.).

Capital Trusts - Trust Preferred Securities

In connection with our merger with PMB, we acquired investments in 2 grantor trusts. These grantor trusts were originally formed to sell and issue trust preferred securities to institutional investors (Refer to Note 7 - Long-term Debt). We are not the primary beneficiary, and consequently, these grantor trusts are not consolidated in the consolidated financial statements. At June 30, 2022 and December 31, 2021, our investment in these grantor trusts, which is included in other assets in the consolidated statements of financial condition, totaled $527 thousand.

Qualified Affordable Housing Partnerships - Low Income Housing Tax Credits

We invest in limited partnerships that operate qualified affordable housing ~~projects.~~projects that qualify for low income housing tax credits (“LIHTC”). The returns on these investments are generated primarily through allocated Federal tax credits and other tax benefits. In addition, ~~these~~LIHTC investments contribute to our compliance with the Community Reinvestment Act. These limited partnerships are considered to be VIEs, because either (i) they do not have sufficient equity investment at risk or (ii) the limited partners with equity at risk do not have substantive kick-out rights through voting rights or substantive participating rights over the general partner. As a limited partner, we are not the primary beneficiary because the general partner has the ability to direct the activities of the VIEs that most significantly impact their economic performance. As a result, we do not consolidate these partnerships.

The following table presents information regarding balances in ~~our qualified affordable housing partnerships~~LIHTC investments for the periods indicated:


($ in thousands)	($ in thousands)	June 30, 2021		December 31, 2020		($ in thousands)	June 30, 2022		December 31, 2021
Ending balance(1)	Ending balance(1)	$	41,146	$	43,209	Ending balance(1)	$	44,006	$	38,982
Aggregate funding commitment	Aggregate funding commitment	61,278		61,278��		Aggregate funding commitment	67,961		61,278
Total amount funded	Total amount funded	45,155		42,991		Total amount funded	53,038		51,014
Unfunded commitment	Unfunded commitment	16,123		18,287		Unfunded commitment	14,923		10,264
Maximum loss exposure	Maximum loss exposure	41,146		43,209		Maximum loss exposure	44,006		38,982

(1)Included in other assets in the accompanying Consolidated Statements of Financial Condition.

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The following table presents information regarding activity in our ~~qualified affordable housing partnerships~~LIHTC investments for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Fundings	Fundings	$	1,161	$	9,312	$	2,164	$	13,871	Fundings	$	919	$	1,161	$	2,024	$	2,164
Proportional amortization recognized	Proportional amortization recognized	881		1,148		2,063		2,295		Proportional amortization recognized	1,027		881		2,573		2,063
Income tax credits recognized	Income tax credits recognized	1,158		1,152		2,311		2,208		Income tax credits recognized	1,163		1,158		2,536		2,311

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NOTE 13 – EARNINGS ~~(LOSS)~~ PER COMMON SHARE

The following table presents computations of basic and diluted earnings ~~(loss)~~ per common share ("EPS") for the three and six months ended June 30, 2022:



	Three Months Ended June 30, 2022				Six Months Ended June 30, 2022
($ in thousands except per share data)	Common Stock		Class B Common Stock			Common Stock		Class B Common Stock
Net income	$	26,504	$	208		$	74,645	$	579


Less: preferred stock dividends	—		—			(1,409)		(11)
Less: preferred stock redemption	—		—			(3,718)		(29)


Net income allocated to common stockholders	$	26,504	$	208		$	69,518	$	539

Weighted average common shares outstanding	60,873,481		477,321			61,497,261		477,321
Dilutive effects of restricted shares/units	245,571		—			269,093		—

Dilutive effects of stock options	4,242		—			4,701		—

Average shares and dilutive common shares	61,123,294		477,321			61,771,055		477,321




Basic earnings per common share	$	0.44	$	0.44		$	1.13	$	1.13



Diluted earnings per common share	$	0.43	$	0.44		$	1.13	$	1.13

For the three and six months ended June 30, 2022, there were 354,484 and 806 anti-dilutive restricted shares/units and no anti-dilutive stock options that were excluded from computing diluted earnings per common share.

Table of Conte nts

The following table presents computations of basic and diluted EPS for the three and six months ended June 30, 2021:


		Three Months Ended June 30, 2021				Six Months Ended June 30, 2021					Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
($ in thousands except per share data)	($ in thousands except per share data)	Common Stock		Class B Common Stock			Common Stock		Class B Common Stock			($ in thousands except per share data)	Common Stock		Class B Common Stock		Common Stock		Class B Common Stock
Net income	Net income	$	18,870	$	180		$	33,109	$	316		Net income	$	18,870	$	180	$	33,109	$	316
Less: Income allocated to participating securities		0		0			(121)		(1)
Less: income allocated to participating securities												Less: income allocated to participating securities	—		—		(121)		(1)

Less: preferred stock dividends	Less: preferred stock dividends	(1,711)		(16)			(4,822)		(46)			Less: preferred stock dividends	(1,711)		(16)		(4,822)		(46)
Less: preferred stock redemption	Less: preferred stock redemption	0		0			(3,315)		(32)			Less: preferred stock redemption	—		—		(3,315)		(32)

Net income allocated to common stockholders	Net income allocated to common stockholders	$	17,159	$	164		$	24,851	$	237		Net income allocated to common stockholders	$	17,159	$	164	$	24,851	$	237

Weighted average common shares outstanding	Weighted average common shares outstanding	50,172,865		477,321			50,024,048		477,321			Weighted average common shares outstanding	50,172,865		477,321		50,024,048		477,321
Dilutive effects of restricted shares/units		238,008		0			302,848		0
Dilutive effects of stock units												Dilutive effects of stock units	238,008		—		302,848		—

Dilutive effects of stock options	Dilutive effects of stock options	4,008		0			6,068		0			Dilutive effects of stock options	4,008		—		6,068		—

Average shares and dilutive common shares	Average shares and dilutive common shares	50,414,881		477,321			50,332,964		477,321			Average shares and dilutive common shares	50,414,881		477,321		50,332,964		477,321

Basic earnings per common share	Basic earnings per common share	$	0.34	$	0.34		$	0.50	$	0.50		Basic earnings per common share	$	0.34	$	0.34	$	0.50	$	0.50

Diluted earnings per common share	Diluted earnings per common share	$	0.34	$	0.34		$	0.49	$	0.50		Diluted earnings per common share	$	0.34	$	0.34	$	0.49	$	0.50

For the three and six months ended June 30, 2021, there were 218,829 and 134,037 ofanti-dilutive restricted shares/units and 0no anti-dilutive stock options that were ~~not considered in~~excluded from computing diluted earnings per common ~~share, because they were anti-dilutive.~~share.

During the first quarter of 2021, all of the Company's outstanding stock appreciation rights (SARs) were exercised resulting in the net issuance of 305,772 shares of voting common stock. Prior to this exercise, the SARs were considered participating securities and income was allocated to the respective holder and not part of income (loss) available to common stockholders. After the exercise of all of the Company's outstanding SARs, there are no longer any participating securities outstanding and the net shares issued in settlement of such SARs are included in the computation of average common shares for both basic and diluted earnings per share.

~~The following table presents computations of basic and diluted EPS for the three and six months ended June 30, 2020:~~

Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
($ in thousands except per share data) Common Stock Class B Common Stock Common Stock Class B Common Stock
Net loss $ (18,273) $ (176) $ (24,804) $ (238)
Less: participating securities dividends (93) (1) (186) (2)
Less: preferred stock dividends (3,409) (33) (6,909) (66)
Less: preferred stock redemption 49 0 570 5
Net loss allocated to common stockholders $ (21,726) $ (210) $ (31,329) $ (301)
Weighted average common shares outstanding 49,553,598 477,321 49,770,527 477,321
Dilutive effects of stock units 0 0 0 0
Dilutive effects of stock options 0 0 0 0
Average shares and dilutive common shares 49,553,598 477,321 49,770,527 477,321
Basic loss per common share $ (0.44) $ (0.44) $ (0.63) $ (0.63)
Diluted loss per common share $ (0.44) $ (0.44) $ (0.63) $ (0.63)

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For the three and six months ended June 30, 2020, there were 960,090 and 960,883 of restricted shares/units and 55,069 and 55,438 of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive.

NOTE 14 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as unfunded loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met prior to their expiration dates. Commitments may expire without being used. Risk of credit loss exists up to the face amount of these instruments. The same credit policies are used to make such commitments as are used for originating loans, including obtaining collateral at exercise of the commitment.

The following table presents the contractual amount of financial instruments with off-balance-sheet risk as of the periods indicated:


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate		($ in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to extend credit	Commitments to extend credit	$	29,551	$	59,078	$	17,555	$	38,141	Commitments to extend credit	$	48,805	$	185,478	$	37,107	$	136,921
Unused lines of credit	Unused lines of credit	551		1,527,667		1,783		1,348,138		Unused lines of credit	4,454		1,995,891		6,894		1,699,933
Letters of credit	Letters of credit	477		7,900		234		8,274		Letters of credit	2,825		7,299		2,553		5,617

Other Commitments

At June 30, ~~2021,~~2022, we had unfunded commitments of ~~$16.1~~$14.9 million, ~~$5.6~~$9.4 million, and ~~$2.5~~$7.9 million for ~~qualified affordable housing fund partnerships,~~LIHTC investments, Small Business Investment Company ("SBIC") investments, and other investments, respectively.

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NOTE 15 – REVENUE RECOGNITION

The following table presents noninterest income, segregated by revenue streams, in-scope and out-of-scope of Topic 606 - Revenue From Contracts With Customers, for the periods indicated:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Noninterest income	Noninterest income									Noninterest income
In scope of Topic 606	In scope of Topic 606									In scope of Topic 606
Deposit service fees	Deposit service fees	$	825	$	420	$	1,635	$	959	Deposit service fees	$	1,627	$	825	$	3,281	$	1,635
Debit card fees	Debit card fees	496		380		883		557		Debit card fees	542		496		995		883

Other	Other	102		59		181		108		Other	137		102		296		181
Noninterest income (in-scope of Topic 606)	Noninterest income (in-scope of Topic 606)	1,423		859		2,699		1,624		Noninterest income (in-scope of Topic 606)	2,306		1,423		4,572		2,699
Noninterest income (out-of-scope of Topic 606)	Noninterest income (out-of-scope of Topic 606)	2,747		4,669		5,852		5,965		Noninterest income (out-of-scope of Topic 606)	4,880		2,020		8,524		5,553
Total noninterest income	Total noninterest income	$	4,170	$	5,528	$	8,551	$	7,589	Total noninterest income	$	7,186	$	3,443	$	13,096	$	8,252

We do not typically enter into long-term revenue contracts with ~~customers~~clients and as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we did not have any significant contract ~~balances.~~balances within the scope of Topic 606. As of June 30, ~~2021,~~2022, we did not capitalize any revenue contract acquisition costs.

Sale-leaseback Transaction: In January 2022, we completed a sale-leaseback transaction for 1 of our branch locations. We sold the branch for $2.4 million and recognized a gain of $771 thousand which is included in other income in the accompanying consolidated statements of operations.

NOTE 16 – RELATED-PARTY TRANSACTIONS

Certain of our executive officers and directors, and their related interests, are customers of, or have had transactions with the Bank in the ordinary course of business, including deposits, loans and other financial services related transactions. From time to time, the Bank may make loans to executive officers and directors, and their related interests, in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank’s underwriting guidelines, and do not involve more than

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the normal risk of collectability or present other unfavorable features. As of June 30, ~~2021,~~2022, no related party loans were categorized as nonaccrual, past due, restructured or potential problem loans.

Transactions with Related Parties

The Company and the Bank have engaged in transactions described below with the Company’s current or former directors, executive officers, and beneficial owners of more than 5five percent of the outstanding shares of the Company’s voting common stock and certain persons related to them.

As previously disclosed, the Company’s Board of Directors has authorized and directed the Company to provide indemnification, advancement and/or reimbursement for the costs of separate independent counsel retained by any then-current officer or director, in their individual capacity, with respect to matters related to (i) an investigation by the Special Committee of the Company’s Board of Directors in late 2016, (ii) a formal order of investigation issued by the SEC on January 4, 2017 (since resolved), and (iii) any civil or administrative proceedings against the Company as well as officers and directors currently or previously associated with the ~~Company.~~Company (collectively, the “Indemnified Matters”).

~~During~~Indemnification costs were paid or reimbursed by the Company or its insurance carriers on behalf of certain current directors in connection with the Indemnified Matters, in an aggregate amount less than $120 thousand and $208 thousand for the three and six months ended June 30, ~~2021, indemnification~~2022. Indemnification costs were paid or reimbursed by the Company ~~included $555 thousand and $564 thousand incurred by the Company’s former Interim Chief Financial Officer and Chief Strategy Officer, J. Francisco A. Turner. Indemnification costs were also paid~~or its insurance carriers on behalf of certain current ~~and former~~ directors ~~and former executive officers~~ in ~~amounts each less than $120~~connection with the Indemnified Matters in aggregate amount of $156 thousand for the three and six months ended June 30, 2021.

Indemnification costs were paid on behalf of certain current and former directors and former executive officers in amounts each less than $120 thousand for the three and six months ended June 30, 2020.

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NOTE 17 – LITIGATION

From time to time, we are involved as plaintiff or defendant in various legal actions arising in the normal course of business. In accordance with applicable accounting guidance, we establish an accrued liability when those matters present loss contingencies that are both probable and estimable. ~~We continue to monitor the matters for further developments that could affect the amount of the accrued liability that has been previously established.~~

While the ultimate liability with respect to legal actions cannot be determined at this time, we believe that damages, if any, and other amounts relating to pending matters are not likely to be material to the consolidated financial statements.

NOTE 18 – SUBSEQUENT EVENTS

We have evaluated events from the date of the consolidated financial statements on June 30, ~~2021~~2022 through the issuance of these consolidated financial statements included in this Quarterly Report on Form 10-Q.

Subsequent to June 30, 2022, we repurchased 485,282 shares of common stock at a weighted average price of $18.07, or $8.8 million. Since the announcement of the stock repurchase program on March 15, 2022, we have repurchased a total of 2,813,978 shares of common stock at a weighted average price of $18.45 per share, or $51.9 million.

There have been no other subsequent events that occurred during such period that would require disclosure in this report or would be required to be recognized in the consolidated financial statements as of June 30, 2022.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and six months ended June 30, ~~2021.~~2022. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, ~~2021.~~2022.

Executive Overview

We are focused on providing core banking products and services, including customized and innovative banking and lending solutions, designed to cater to the unique needs of California's diverse businesses, entrepreneurs and communities through our 30 31 full service branches in Orange, Los Angeles, San Diego, and Santa Barbara Counties. Through our over ~~600~~670 dedicated professionals, we are committed to servicing and building enduring relationships by providing a higher standard of banking. We offer a variety of financial products and services designed around our target clients in order to serve their banking and financial needs. We continue to grow average loans and earning assets, improve our deposit mix, reduce our cost of deposits, and maintain disciplined expense control. Strong loan production helped to offset runoff in certain legacy areas of our portfolio. Our loan pipeline is steadily building which is expected to support continued loan and earning asset growth through the year, assuming improving economic trends continue. ~~During the first quarter,~~

On October 18, 2021, we ~~also announced that we entered into a definitive agreement to acquire~~consummated our merger with Pacific Mercantile Bancorp ~~(PMBC)~~(PMB). Through these efforts, we continue to transform our franchise into a relationship-focused community bank, maintaining our credit quality and serving businesses, entrepreneurs and individuals within our footprint.

Financial Highlights

For the ~~three months ended June 30, 2021, March 31,~~second quarter of 2022, net income and net income available to common stockholders was $26.7 million, or $0.43 per diluted common share. This compares to net income of $48.5 million and net income available to common stockholders of $43.3 million, or $0.69 per diluted common share, for the first quarter of 2022 and net income of $19.1 million and net income available to common stockholders of $17.3 million, or $0.34 per diluted common share, for the second quarter of 2021. The first quarter of 2022 net income available to common stockholders included a $31.3 million pre-tax recovery from the settlement of a previously charged-off loan and a $3.7 million after-tax charge related to the redemption of Series E Preferred Stock. The operating results of PMB have been included since the date of acquisition in the fourth quarter of 2021 and ~~June 30, 2020, net income (loss) was $19.1 million, $14.4 million and $(18.4) million. Diluted earnings (loss) from operations per common share were $0.34, $0.15 and $(0.44)~~consequently, may impact the comparison of the financial results for the ~~three months ended June 30, 2021, March 31, 2021 and June 30, 2020.~~periods presented.

Financial results for the second quarter of ~~2021~~2022 included:

•Adjusted EPS of $0.45

•Return on average assets of ~~0.98%~~1.15%, compared to 2.09% in the prior quarter

•~~Total loan production~~Pre-tax pre-provision return on average assets of ~~$904.1 million, including loan fundings of $847.0 million~~

•~~Period-end total cost of deposits of 0.20% and average cost of total deposits of 0.23%~~1.58%, ~~a 5 basis point decrease~~up from 1.54% in the prior quarter

•Net interest margin of ~~3.27%~~3.58%, an 8increase of 7 basis ~~point increase~~points from the prior quarter

•~~Noninterest-bearing deposit balances~~Average noninterest-bearing deposits of ~~29%~~38%, flat with the prior quarter

•Book value per common share of $15.70, up from $15.65 in the prior quarter

•Tangible common equity per common share of $14.05, flat with the prior quarter

•Average cost of total deposits ~~at June 30, 2021, up~~of 0.17%, an increase of 9 basis points from ~~23% a year earlier~~the prior quarter

•Allowance for credit losses at ~~1.33%~~1.34% of total loans and ~~155%~~224% of non-performing loans, ~~at June 30, 2021~~up from 1.32% and 181% in the prior quarter

•~~Total deferrals/forbearances declined to $86.6~~Repurchased $38.9 million ~~at June 30, 2021 from $108.7 million at March 31, 2021~~

•~~Common Equity Tier 1 capital at 11.14%~~

~~Proposed Merger with Pacific Mercantile Bancorp:~~In March 2021, we entered into an agreement to merge (the “Merger Agreement”) with Pacific Mercantile Bancorp (“PMBC”), pursuant to which PMBC will merge (the “Merger”) with and into the Company, with the Company as the surviving corporation. Subject to the terms and conditions of ~~the Merger Agreement, upon consummation of the Merger, each outstanding share of PMBC~~ common stock excluding certain specified shares, will be converted into the right to receive 0.50 (the “Exchange Ratio”) of a share of the Company's common stock. In addition, at the effective time of the Merger, the Company will cash out all outstanding share-based awards based on formulas using the average price of the Company's common stock for a 20-day trading period prior to the closing of the Merger. Subject to regulatory approval, the transaction is expected to close during the ~~third~~ quarter ~~of 2021.~~and $51.9 million cumulatively through July 20

COVID-19 Operational Update

The markets in which we operate are impacted by continuing uncertainty about the pace and strength of reopening and recovering from the COVID-19 pandemic. Despite the challenges created by the pandemic, we continue to execute on our strategic initiatives and the transformation of our balance sheet. ~~We continue to operate 28~~All of our 30 branches ashave been reopened, including those branches in overlapping areas we temporarily closed ~~some overlapping areas~~ at the beginning of the pandemic to ensure an adequate balance between employee and client safety and business continuity to meet our clients' banking needs. ~~The majority~~We have adopted a hybrid workplace environment, allowing many of our employees outside of our branches ~~are working offsite with only essential~~the flexibility to continue to work remotely. We encourage our employees ~~onsite. We are classified as an 'essential' business~~to get vaccinated and we ~~have implemented social~~continue to monitor all federal, state, and ~~physical safeguards for our customers and employees within all of our locations.~~

local laws to ensure we are in compliance with the latest health orders.

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~~CARES Act Response Efforts~~

On March 27, 2020, the U.S. federal government signed the CARES Act into law, which provided emergency assistance and health care response for individuals, families, and businesses affected by the COVID-19 pandemic. The CARES Act allocated nearly $660 billion for the PPP and was intended to assist small businesses negatively affected by the pandemic and economic downturn by providing funds for payroll and other qualifying expenses made through August 8, 2020. The loans are 100% guaranteed by the SBA and the full principal amount of the loans may qualify for loan forgiveness if certain conditions are met.

~~Paycheck Protection Program Flexibility Act of 2020~~

On October 7, 2020, the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”) extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period). The extension of the deferral period under the Flexibility Act automatically applied to all PPP loans.

~~Economic Aid Act~~

The Economic Aid Act became law December 27, 2020 extending the SBA authority to make PPP loans through May 31, 2021. The SBA issued an Interim Final Rule (IFR) January 6, 2021 and eligible applicants were able to obtain a first or second PPP loan. We elected to continue our participation in the PPP and resumed the origination of PPP loans effective January 11, 2021.

The PPP has provided an opportunity to differentiate ourselves by demonstrating how true client service can make a meaningful difference. We assisted numerous existing clients with our high touch business framework in addition to successfully attracting many new clients who are consistent with the type of commercial customers that we target in our traditional business development efforts.

As of June 30, ~~2021,~~2022, we have helped businesses through the ~~approvals~~funding of ~~$262~~$411 million in PPP ~~funds during the first round~~loans and ~~$144 million during the second round. We~~ continue to support our clients as we work with them through the forgiveness process. Prior to acquisition, PMB originated $390 million in PPP loans. At June 30, ~~2021,~~2022, outstanding PPP loans totaled ~~$193.9~~$28.4 million, net of fees, of which ~~$65.5~~$6.1 million ~~relates~~related to round one and ~~$128.4~~$22.3 million ~~relates~~related to round two of the SBA program.

Borrower Payment Relief Efforts

We ~~are~~have been committed to supporting our ~~existing borrowers and~~ customers during this period of economic uncertainty. We actively engaged with our borrowers seeking payment relief and waived certain fees for impacted clients. One method we deployed was to offer forbearance and deferments to qualified clients. For ~~single family~~single-family residential mortgage loans, the forbearance period was initially 90 days in length and was patterned after the HUD guidelines where applicable. With respect to our non-SFR loan portfolio, the forbearance and deferment periods were also initially 90 days in length and were permitted to be extended.

Although many of our loans on assistance have reached the expiration of their deferral and forbearance periods, the Bank continues to work with our borrowers to provide reasonable solutions to assist each unique situation during this period of economic uncertainty. We are reviewing their current financial condition as we evaluate additional extension requests of deferral periods. For those commercial borrowers that ~~demonstrate~~demonstrated a continuing need for a deferral, we generally ~~expect to obtain~~obtained credit enhancements such as additional collateral, personal guarantees, and/or reserve requirements in order to grant an additional deferral period. ~~We expect the legacy SFR loans to continue with a higher percentage~~As of June 30, 2022, we no longer offer COVID-related deferments or forbearances, ~~due to the applicable consumer regulations, however, the SFR portfolio is well secured with an average portfolio LTV below 70%.~~

and we do not have any deferments or forbearances outstanding.

For a discussion of the risk factors related to COVID-19, please refer to Part II, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

~~Table of Contents~~

~~The following table presents the composition of our loan portfolio for borrowers that received payment relief as of June 30, 2021 and December 31, 2020:~~

Deferment & Forbearances(1)(2)
June 30, 2021 March 31, 2021
($ in thousands) Number of Loans
Amount(1)(2)
% of
Loan Category Number of Loans
Amount(1)(2)
% of
Loan Category
Commercial:
Commercial and industrial 5 $ 29,246 1.4 % 5 $ 25,427 1.4 %
Commercial real estate 1 1,141 0.1 % 3 3,765 0.4 %
Multifamily — — — % 2 17,000 1.4 %
SBA 2 3,315 1.3 % 3 13,238 3.9 %
Total commercial 8 33,702 0.7 % 13 59,430 1.3 %
Consumer:
Single family residential mortgage 46 52,384 4.1 % 47 48,831 3.9 %
Other consumer 2 472 1.9 % 2 428 1.6 %
Total consumer 48 52,856 4.0 % 49 49,259 3.8 %
Total 56 $ 86,558 1.4 % 62 $ 108,689 1.9 %

~~(1)Excludes loans in forbearance that are current~~

~~(2)Excludes loans delinquent prior to COVID-19~~

~~Loans on deferment or forbearance status decreased $22.1 million during the second quarter of~~ 2021. The Bank is in contact with borrowers to provide additional assistance as needed and we continue to actively monitor and manage all lending relationships in a manner that we believe supports our clients and protects the Bank.

~~Other Efforts~~

To support our community, we continue to meet the immediate needs of our most vulnerable neighbors. We meet these needs by providing donations, grants and sponsorships that support affordable housing, workforce and economic development and community services. Our volunteers have continued to provide financial literacy classes in a virtual environment as well as developing a virtual tour of the Bank’s headquarters that introduces students to a variety of different career paths and business unit leaders.

CRITICAL ACCOUNTING ~~POLICIES~~ESTIMATES

~~Our consolidated financial statements are prepared~~We follow accounting and reporting policies and procedures that conform, in ~~accordance with~~all material respects, to GAAP and ~~general~~to practices ~~within~~generally applicable to the ~~banking industry. As certain accounting policies require~~financial services industry, the most significant ~~estimates and assumptions that have a material impact on the carrying value~~ of ~~assets and liabilities, we have established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. Our critical accounting policies~~which are described in Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements ~~and~~included in ~~the “Critical Accounting Policies” section~~Item 8 of ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company's~~our Annual Report on Form 10-K for the year ended December 31, ~~2020 and in Note 1~~2021 filed with the SEC. The preparation of Consolidated Financial Statements ~~(unaudited)~~in conformity with GAAP requires management to make judgments and accounting estimates that affect the amounts reported for assets, liabilities, revenues and expenses on the Consolidated Financial Statements and accompanying notes, and amounts disclosed as contingent assets and liabilities. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

Accounting estimates are necessary in the application of certain accounting policies and procedures that are particularly susceptible to significant change. Critical accounting policies are defined as those that require the most complex or subjective judgment and are reflective of significant uncertainties, and could potentially result in materially different results under different assumptions and conditions. Management has identified our most critical accounting policies and accounting estimates as: investment securities, allowance for credit losses, business combinations, valuation of acquired loans, goodwill and deferred income taxes. See Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements (Unuadited) included in ~~Part I~~Item 1 for a description of these policies.

Investment Securities. Held-to-maturity debt securities are carried at amortized cost and available-for-sale debt securities are carried at fair value. These securities are analyzed for credit deterioration under ASC 326, which requires the Company to determine whether impairment exists as of the reporting date and whether that impairment is due to credit deterioration. An allowance for credit losses would be established for losses on held-to-maturity and available-for-sale debt securities due to credit losses and would be reported as a component of provision for credit losses.

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The valuation of investment securities considers observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and respective terms and conditions for debt instruments. We employ procedures to monitor the pricing service's assumptions and establish processes to challenge the pricing service's valuations that appear unusual or unexpected. Multiple quotes or prices may be obtained in this process and we determine which fair value is most appropriate based on market information and analysis. Quotes obtained through this process are generally non-binding. We follow established procedures to ensure that assets and liabilities are properly classified in the fair value hierarchy. All securities available-for-sale were classified as Level 2 at June 30, 2022 and December 31, 2021. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and management's judgment and evaluation for valuation. We had no securities available-for-sale classified as Level 3 at June 30, 2022 and December 31, 2021.

The estimates used to determine the fair values of investment securities can be complex and require judgment. These critical estimates are difficult to predict and may result in credit losses in future periods if actual results materially differ from the estimated assumptions utilized in our valuation of these assets.

Allowance for Credit Losses (“ACL”).The ACL is estimated on a quarterly basis and represents management’s estimate of current expected credit losses (“CECL”) in our loan portfolio. The ACL estimate is based on the accounting standard commonly known as CECL. Under the CECL method, pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually. Collective loss estimates are determined by applying loss factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining life of the collectively evaluated portfolio. The allowance for loan losses includes qualitative adjustments to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for, including those described in the federal banking agencies' joint interagency policy statement on ALL. These factors include, among others, inherent imprecision in forecasting economic variables, including determining the depth and duration of economic cycles and their impact to relevant economic variables; qualitative adjustments based on our evaluation of different forecast scenarios and known recent events impacting relevant economic variables; data factors that address the risk that certain model inputs may not reflect all available information including (i) risk factors that have not been fully addressed in internal risk ratings, (ii) changes in lending policies and procedures, (iii) changes in the level and quality of experience held by lending management, (iv) imprecision in the risk rating system and (v) limitations in data available for certain loan portfolios. The ACL process also includes challenging and calibrating the model and model results against observed information, trends and events within the loan portfolio, among others. The ACL and provision for credit losses include amounts and changes from both the allowance for loan losses and the reserve for unfunded commitments.

Business Combinations.Business combinations are accounted for using the acquisition method of accounting under ASC Topic 805 - Business Combinations. Under the acquisition method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

The estimates used to determine the fair values of assets and liabilities acquired in a business combination can be complex and require judgment. For example, we generally value core deposit intangible assets using a discounted cash flow approach, which require a number of critical estimates that include, but are not limited to, future expected cash flows from depositor relationships, expected "decay" rates, and the determination of discount rates. These critical estimates are difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our initial valuation of net assets and liabilities acquired.

Goodwill. Goodwill represents the excess purchase price of businesses acquired over the fair value of the identifiable net assets acquired. Goodwill is not subject to amortization and is evaluated for impairment at least annually, normally during the fourth fiscal quarter, or more frequently in the interim if events occur or circumstances change indicating impairment may have occurred. The determination of whether impairment has occurred is based on an assessment of several factors, including, but not limited to, operating results, business plans, economic projections, anticipated future cash flows, and current market data. Any impairment identified as part of this ~~Quarterly Report~~testing is recognized through a charge to noninterest expense.

The assessment of impairment discussed above incorporate inherent uncertainties, including projected operating results and future market conditions, which are often difficult to predict and may result in impairment charges in future periods if actual results materially differ from the estimated assumptions utilized in our forecasts.

Acquired Loans.At acquisition date, loans are evaluated to determine whether they meet the criteria of a purchased credit-deteriorated (“PCD”) loan. PCD loans are loans that in management's judgement have experienced more than insignificant deterioration in credit quality since origination. Factors that indicate a loan may have experienced more than insignificant credit deterioration include delinquency, downgrades in credit rating, non-accrual status, and other negative factors identified by

Table of Conte nts

management at the time of initial assessment. PCD loans are initially recorded at fair value, with the resulting non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the date of acquisition, an ACL is established with a corresponding increase to the overall acquired loan balance. This initial ACL is determined using the Company's current expected credit losses methodology.

Acquired loans that are not considered PCD loans (“non-PCD loans”) are also recognized at fair value at the acquisition date, with the resulting credit and non-credit discount or premium being amortized or accreted into interest income using the interest method. In addition to the fair value adjustment, at the time of acquisition, the Company establishes an initial ACL for acquired non-PCD loans through a charge to the provision for credit losses. This initial ACL is determined using the Company's current expected credit losses methodology.

Subsequent to acquisition date, the ACL for both PCD and non-PCD loans is determined using the same methodology to determine current expected credit losses that is applied to all other loans.

The estimates used to determine the fair values of non-PCD and PCD acquired loans can be complex and require significant judgment regarding items such as default rates, timing and amount of future cash flows, prepayment rates and other factors. These critical estimates are difficult to predict and may result in provisions for credit losses in future periods if actual losses materially differ from the estimated assumptions utilized in our initial valuation of acquired loans.

Deferred Taxes.Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on ~~Form 10-Q.~~enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are also recognized for operating loss and tax credit carryforwards. Accounting guidance requires that companies assess whether a valuation allowance should be established against the deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies.

Although we believe our assessments of the realizability of deferred income taxes are reasonable, no assurance can be given that their realizability will not be different from that which is reflected in our net deferred tax asset balance.

Tax positions that are uncertain but meet a more-likely-than-not recognition threshold are initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position meets the more likely than not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management's judgment.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

Recent Accounting Pronouncements Not Yet Adopted

Our recent accounting pronouncements not yet adopted are described in Note 1 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and in Note 1 Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

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Non-GAAP Financial Measures

Under Item 10(e) of SEC Regulation S-K, public companies disclosing financial measures in filings with the SEC that are not calculated in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a presentation of the most directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a statement of the reasons why the company's management believes that presentation of the non-GAAP financial measure provides useful information to investors regarding the company's financial condition and results of operations and, to the extent material, a statement of the additional purposes, if any, for which the company's management uses the non-GAAP financial measure.

Tangible assets, tangible equity, tangible common equity, tangible equity to tangible assets, tangible common equity to tangible assets, tangible common equity per common share, return on average tangible common equity, adjusted noninterest ~~income, adjusted noninterest~~ expense, adjusted noninterest expense to average total assets, pre-tax pre-provision (PTPP) income, ~~(loss),~~ adjusted PTPP income, ~~(loss),~~ PTPP income (loss) ROAA, adjusted PTPP income ~~(loss)~~ ROAA, efficiency ratio, adjusted efficiency ratio, ~~adjusted total revenue,~~ adjusted net income, adjusted net income available to common stockholders, adjusted diluted earnings per share (EPS) and adjusted return on average assets (ROAA) constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance.

Tangible assets and tangible equity are calculated by subtracting goodwill and other intangible assets from total assets and total equity. Tangible common equity is calculated by subtracting preferred stock from tangible equity. Return on average tangible common equity is computed by dividing net income (loss) available to common stockholders, after adjustment for amortization of intangible assets, by average tangible common equity. Banking regulators also exclude goodwill and other intangible assets from stockholders' equity when assessing the capital adequacy of a financial institution.

PTPP income is calculated by adding net interest income and noninterest income (total revenue) and subtracting noninterest expense. Adjusted PTPP income is calculated by adding ~~net interest income and adjusted noninterest income (adjusted~~ total ~~revenue)~~revenue and subtracting adjusted noninterest expense. PTPP income ROAA is computed by dividing annualized PTPP income by average assets. Adjusted PTPP income ROAA is computed by dividing annualized adjusted PTPP income by average assets. Efficiency ratio is computed by dividing noninterest expense by total revenue. Adjusted efficiency ratio is computed by dividing adjusted noninterest expense by ~~adjusted~~ total revenue.

Adjusted net income ~~(loss)~~ is calculated by adjusting net income ~~(loss)~~ for tax-effected noninterest ~~income and~~ expense adjustments and the tax impact from the exercise of stock appreciation ~~rights.~~rights for the periods indicated. Adjusted ROAA is computed by dividing annualized adjusted net income by average assets. Adjusted net income ~~(loss)~~ available to common ~~shareholders~~stockholders is computed by removing the impact of preferred stock redemptions from adjusted net income. Adjusted diluted earnings per share is computed by dividing adjusted net income ~~(loss).~~available to common stockholders by the weighted average diluted common shares outstanding.

Management believes the presentation of these non-GAAP financial measures ~~provides~~provide useful supplemental information that is essential to a proper understanding of the financial results and operating performance of the Company. This disclosure should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.

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(Dollars in thousands, except per share data) (Unaudited)	(Dollars in thousands, except per share data) (Unaudited)	June 30, 2021			December 31, 2020			(Dollars in thousands, except per share data) (Unaudited)	June 30, 2022			December 31, 2021
Tangible common equity, and tangible common equity to tangible assets ratio	Tangible common equity, and tangible common equity to tangible assets ratio							Tangible common equity, and tangible common equity to tangible assets ratio
Total assets	Total assets	$	8,027,413		$	7,877,334		Total assets	$	9,502,113		$	9,393,743
Less goodwill	Less goodwill	(37,144)			(37,144)			Less goodwill	(95,127)			(94,301)
Less other intangible assets	Less other intangible assets	(2,069)			(2,633)			Less other intangible assets	(4,677)			(6,411)
Tangible assets(1)	Tangible assets(1)	$	7,988,200		$	7,837,557		Tangible assets(1)	$	9,402,309		$	9,293,031

Total stockholders' equity								Total stockholders' equity	$	949,130		$	1,065,290
Less preferred stock								Less preferred stock	—			(94,956)
Total common stockholders' equity								Total common stockholders' equity	$	949,130		$	970,334

Total stockholders' equity	Total stockholders' equity	$	829,362		$	897,207		Total stockholders' equity	$	949,130		$	1,065,290
Less goodwill	Less goodwill	(37,144)			(37,144)			Less goodwill	(95,127)			(94,301)
Less other intangible assets	Less other intangible assets	(2,069)			(2,633)			Less other intangible assets	(4,677)			(6,411)
Tangible equity(1)	Tangible equity(1)	790,149			857,430			Tangible equity(1)	849,326			964,578
Less preferred stock	Less preferred stock	(94,956)			(184,878)			Less preferred stock	—			(94,956)
Tangible common equity(1)	Tangible common equity(1)	$	695,193		$	672,552		Tangible common equity(1)	$	849,326		$	869,622

Total stockholders' equity to total assets	Total stockholders' equity to total assets	10.33		%	11.39		%	Total stockholders' equity to total assets	9.99		%	11.34		%
Tangible equity to tangible assets(1)	Tangible equity to tangible assets(1)	9.89		%	10.94		%	Tangible equity to tangible assets(1)	9.03		%	10.38		%
Tangible common equity to tangible assets(1)	Tangible common equity to tangible assets(1)	8.70		%	8.58		%	Tangible common equity to tangible assets(1)	9.03		%	9.36		%

Common shares outstanding	Common shares outstanding	50,313,228			49,767,489			Common shares outstanding	59,985,736			62,188,206
Class B non-voting non-convertible common shares outstanding	Class B non-voting non-convertible common shares outstanding	477,321			477,321			Class B non-voting non-convertible common shares outstanding	477,321			477,321
Total common shares outstanding	Total common shares outstanding	50,790,549			50,244,810			Total common shares outstanding	60,463,057			62,665,527

Book value per common share								Book value per common share	$	15.70		$	15.48
Tangible common equity per common share(1)	Tangible common equity per common share(1)	$	13.69		$	13.39		Tangible common equity per common share(1)	$	14.05		$	13.88
Book value per common share		$	14.46		$	14.18

(1)Non-GAAP measure.

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		Three Months Ended						Six Months Ended June 30,				Three Months Ended											Six Months Ended June 30,
(Dollars in thousands) (Unaudited)	(Dollars in thousands) (Unaudited)	June 30, 2021			March 31, 2021				June 30, 2020				June 30, 2021			June 30, 2020			(Dollars in thousands) (Unaudited)	June 30, 2022			March 31, 2022			June 30, 2021			2022			2021
Return on tangible common equity	Return on tangible common equity																		Return on tangible common equity
Average total stockholders' equity	Average total stockholders' equity	$	814,973		$	888,174			$	854,250			$	851,371		$	885,149		Average total stockholders' equity	$	969,885		$	1,049,912		$	814,973		$	1,009,677		$	851,371
Less average preferred stock	Less average preferred stock	(94,956)			(164,895)				(185,471)				(129,733)			(187,539)			Less average preferred stock	—			(75,965)			(94,956)			(37,773)			(129,733)
Average total common stockholders' equity																			Average total common stockholders' equity	969,885			973,947			720,017			971,904			721,638
Less average goodwill	Less average goodwill	(37,144)			(37,144)				(37,144)				(37,144)			(37,144)			Less average goodwill	(95,127)			(94,307)			(37,144)			(94,719)			(37,144)
Less average other intangible assets	Less average other intangible assets	(2,224)			(2,517)				(3,574)				(2,370)			(3,789)			Less average other intangible assets	(4,869)			(6,224)			(2,224)			(5,543)			(2,370)
Average tangible common equity(1)	Average tangible common equity(1)	$	680,649		$	683,618			$	628,061			$	682,124		$	656,677		Average tangible common equity(1)	$	869,889		$	873,416		$	680,649		$	871,642		$	682,124

Net income (loss) available to common stockholders		$	17,323		$	7,825			$	(21,936)			$	25,088		$	(31,630)
Net income available to common stockholders																			Net income available to common stockholders	$	26,712		$	43,345		$	17,323		$	70,057		$	25,088
Add amortization of intangible assets	Add amortization of intangible assets	282			282				430				564			859			Add amortization of intangible assets	313			441			282			754			564

Less tax effect on amortization of intangible assets		(59)			(59)				(90)				(118)			(180)
Net income (loss) available to common stockholders(1)		$	17,546		$	8,048			$	(21,596)			$	25,534		$	(30,951)
Less tax effect on amortization of intangible assets(2)																			Less tax effect on amortization of intangible assets(2)	(66)			(93)			(59)			(158)			(118)
Net income available to common stockholders(1)																			Net income available to common stockholders(1)	$	26,959		$	43,693		$	17,546		$	70,653		$	25,534

Return on average equity	Return on average equity	9.38		%	6.56		%		(8.69)		%		7.92		%	(5.69)		%	Return on average equity	11.05		%	18.74		%	9.38		%	15.02		%	7.92		%
Return on average tangible common equity(1)	Return on average tangible common equity(1)	10.34		%	4.77		%		(13.83)		%		7.55		%	(9.48)		%	Return on average tangible common equity(1)	12.43		%	20.29		%	10.34		%	16.35		%	7.55		%

Statutory Federal tax rate utilized for calculating tax effect on amortization of intangible assets		21.00		%	21.00		%		21.00		%		21.00		%	21.00		%

(1)Non-GAAP measure.

(2)Adjustments shown net of a statutory Federal tax rate of 21%.

Three Months Ended Six Months Ended June 30,
(Dollars in thousands)
(Unaudited) June 30,
2021 March 31,
2021 June 30,
2020 2021 2020
Adjusted noninterest income and expense
Total noninterest income $ 4,170 $ 4,381 $ 5,528 $ 8,551 $ 7,589
Noninterest income adjustments:
Net (gain) loss on securities available for sale — — (2,011) — (2,011)
Fair value adjustment on legacy SFR loans held for sale (20) — (25) (20) 1,561
Total noninterest income adjustments (20) — (2,036) (20) (450)
Adjusted noninterest income(1)
$ 4,150 $ 4,381 $ 3,492 $ 8,531 $ 7,139
Total noninterest expense $ 40,559 $ 46,735 $ 72,770 $ 87,294 $ 119,689
Noninterest expense adjustments:
Naming rights termination — — (26,769) — (26,769)
Extinguishment of debt — — (2,515) — (2,515)
Professional (fees) recoveries 1,284 (721) (875) 563 (2,553)
Merger-related costs (700) (700) — (1,400) —
Adjustments to noninterest expense before gain (loss) in alternative energy partnership investments 584 (1,421) (30,159) (837) (31,837)
Gain (loss) in alternative energy partnership investments 829 (3,630) 167 (2,801) (1,738)
Total noninterest expense adjustments 1,413 (5,051) (29,992) (3,638) (33,575)
Adjusted noninterest expense(1)
$ 41,972 $ 41,684 $ 42,778 $ 83,656 $ 86,114
Average assets $ 7,827,006 $ 7,860,952 $ 7,740,206 $ 7,843,885 $ 7,651,575
Noninterest expense to average total assets 2.08 % 2.41 % 3.78 % 2.24 % 3.15 %
Adjusted noninterest expense to average total assets(1)
2.15 % 2.15 % 2.22 % 2.15 % 2.26 %


	Three Months Ended						Six Months Ended June 30,
(Dollars in thousands) (Unaudited)	June 30, 2022			March 31, 2022				June 30, 2021			2022			2021
Adjusted noninterest expense








Total noninterest expense	$	48,612		$	46,596			$	39,832		$	95,208		$	86,995
Noninterest expense adjustments:




Professional recoveries (fees)	(455)			106				1,284			(349)			563
Merger-related costs	—			—				(700)			—			(1,400)


Noninterest expense adjustments before (loss) gain in alternative energy partnership investments	(455)			106				584			(349)			(837)
(Loss) gain in alternative energy partnership investments	(1,043)			(158)				829			(1,201)			(2,801)
Total noninterest expense adjustments	(1,498)			(52)				1,413			(1,550)			(3,638)
Adjusted noninterest expense(1)	$	47,114		$	46,544			$	41,245		$	93,658		$	83,357

Average assets	$	9,342,696		$	9,392,305			$	7,827,006		$	9,367,364		$	7,843,885
Noninterest expense to average total assets	2.09		%	2.01		%		2.04		%	2.05		%	2.24		%
Adjusted noninterest expense to average total assets(1)	2.02		%	2.01		%		2.11		%	2.02		%	2.14		%

(1)Non-GAAP measure.

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		Three Months Ended						Six Months Ended June 30,				Three Months Ended											Six Months Ended June 30,
(Dollars in thousands) (Unaudited)	(Dollars in thousands) (Unaudited)	June 30, 2021			March 31, 2021				June 30, 2020				June 30, 2021			June 30, 2020			(Dollars in thousands) (Unaudited)	June 30, 2022			March 31, 2022			June 30, 2021			2022			2021
Adjusted pre-tax pre-provision income	Adjusted pre-tax pre-provision income																		Adjusted pre-tax pre-provision income
Net interest income	Net interest income	$	59,847		$	57,916			$	55,315			$	117,763		$	107,176		Net interest income	$	78,299		$	76,441		$	59,847		$	154,740		$	117,763
Noninterest income	Noninterest income	4,170			4,381				5,528				8,551			7,589			Noninterest income	7,186			5,910			3,443			13,096			8,252
Total revenue	Total revenue	64,017			62,297				60,843				126,314			114,765			Total revenue	85,485			82,351			63,290			167,836			126,015
Noninterest expense	Noninterest expense	40,559			46,735				72,770				87,294			119,689			Noninterest expense	48,612			46,596			39,832			95,208			86,995
Pre-tax pre-provision income (loss)(1)		$	23,458		$	15,562			$	(11,927)			$	39,020		$	(4,924)
Pre-tax pre-provision income(1)																			Pre-tax pre-provision income(1)	$	36,873		$	35,755		$	23,458		$	72,628		$	39,020

Total revenue	Total revenue	$	64,017		$	62,297			$	60,843			$	126,314		$	114,765		Total revenue	$	85,485		$	82,351		$	63,290		$	167,836		$	126,015

Total noninterest income adjustments		(20)			—				(2,036)				(20)			(450)

Adjusted total revenue(1)		63,997			62,297				58,807				126,294			114,315

Noninterest expense	Noninterest expense	40,559			46,735				72,770				87,294			119,689			Noninterest expense	48,612			46,596			39,832			95,208			86,995
Total noninterest expense adjustments	Total noninterest expense adjustments	1,413			(5,051)				(29,992)				(3,638)			(33,575)			Total noninterest expense adjustments	(1,498)			(52)			1,413			(1,550)			(3,638)
Adjusted noninterest expense(1)	Adjusted noninterest expense(1)	41,972			41,684				42,778				83,656			86,114			Adjusted noninterest expense(1)	47,114			46,544			41,245			93,658			83,357
Adjusted pre-tax pre-provision income(1)	Adjusted pre-tax pre-provision income(1)	$	22,025		$	20,613			$	16,029			$	42,638		$	28,201		Adjusted pre-tax pre-provision income(1)	$	38,371		$	35,807		$	22,045		$	74,178		$	42,658

Average assets	Average assets	$	7,827,006		$	7,860,952			$	7,740,206			$	7,843,885		$	7,651,575		Average assets	$	9,342,696		$	9,392,305		$	7,827,006		$	9,367,364		$	7,843,885
Pre-tax pre-provision income (loss) ROAA(1)		1.20		%	0.80		%		(0.62)		%		1.00		%	(0.13)		%
Pre-tax pre-provision income ROAA(1)																			Pre-tax pre-provision income ROAA(1)	1.58		%	1.54		%	1.20		%	1.56		%	1.00		%
Adjusted pre-tax pre-provision income ROAA(1)	Adjusted pre-tax pre-provision income ROAA(1)	1.13		%	1.06		%		0.83		%		1.10		%	0.74		%	Adjusted pre-tax pre-provision income ROAA(1)	1.65		%	1.55		%	1.13		%	1.60		%	1.10		%
Efficiency ratio(1)	Efficiency ratio(1)	63.36		%	75.02		%		119.60		%		69.11		%	104.29		%	Efficiency ratio(1)	56.87		%	56.58		%	62.94		%	56.73		%	69.04		%
Adjusted efficiency ratio(1)	Adjusted efficiency ratio(1)	65.58		%	66.91		%		72.74		%		66.24		%	75.33		%	Adjusted efficiency ratio(1)	55.11		%	56.52		%	65.17		%	55.80		%	66.15		%

(1)Non-GAAP measure.


	Three Months Ended						Six Months Ended June 30,
	June 30, 2022			March 31, 2022				June 30, 2021			2022			2021
Adjusted net income
Net income(1)	$	26,712		$	48,512			$	19,050		$	75,224		$	33,425
Adjustments:

Noninterest expense adjustments	1,498			52				(1,413)			1,550			3,638


Tax impact of adjustments above(2)	(443)			(15)				418			(458)			(1,076)
Tax impact from exercise of stock appreciation rights	—			—				—			—			(2,093)
Adjustments to net income	1,055			37				(995)			1,092			469
Adjusted net income(3)	$	27,767		$	48,549			$	18,055		$	76,316		$	33,894

Average assets	$	9,342,696		$	9,392,305			$	7,827,006		$	9,367,364		$	7,843,885
ROAA	1.15		%	2.09		%		0.98		%	1.62		%	0.86		%
Adjusted ROAA(3)	1.19		%	2.10		%		0.93		%	1.64		%	0.87		%

Adjusted net income available to common stockholders
Net income available to common stockholders	$	26,712		$	43,345			$	17,323		$	70,057		$	25,088
Adjustments to net income	1,055			37				(995)			1,092			469
Adjustments for impact of preferred stock redemption	—			3,747				—			3,747			3,347
Adjusted net income available to common stockholders(3)	$	27,767		$	47,129			$	16,328		$	74,896		$	28,904

Average diluted common shares	61,600,615			62,906,003				50,892,202			62,248,376			50,810,285
Diluted EPS	$	0.43		$	0.69			$	0.34		$	1.13		$	0.49
Adjusted diluted EPS(3)(4)	$	0.45		$	0.75			$	0.32		$	1.20		$	0.57

(1)Net income for the three months ended March 31, 2022 and six months ended June 30, 2022 includes a $31.3 million pre-tax reversal of credit losses due to the recovery from the settlement of a previously charged-off loan; there is no similar recovery in any of the other periods presented. The Bank previously recognized a $35.1 million charge-off for this loan during the third quarter of 2019.

(2)Tax impact of adjustments shown at an effective tax rate of 29.6%.

(3)Non-GAAP measure.

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Three Months Ended Six Months Ended June 30,
(Dollars in thousands, except per share data)
(Unaudited) June 30,
2021 March 31,
2021 June 30,
2020 2021 2020
Adjusted net income (loss)
Net income (loss) $ 19,050 $ 14,375 $ (18,449) $ 33,425 $ (25,042)
Adjustments, net:(1)
Noninterest income 15 — 1,527 15 338
Noninterest expense (1,060) 3,788 22,494 2,729 25,181
Adjusted net income (loss) before tax impact from exercise of stock appreciation rights 18,005 18,163 5,572 36,169 477
Tax impact from exercise of stock appreciation rights — 2,093 — 2,093 —
Adjusted net income (loss)(2)
$ 18,005 $ 16,070 $ 5,572 $ 34,076 $ 477
Average assets $ 7,827,006 $ 7,860,952 $ 7,740,206 $ 7,843,885 $ 7,651,575
ROAA 0.98 % 0.74 % (0.96) % 0.86 % (0.66) %
Adjusted ROAA(2)
0.92 % 0.83 % 0.29 % 0.88 % 0.01 %
Adjusted net income (loss) available to common stockholders
Net income (loss) available to common stockholders $ 17,323 $ 7,825 $ (21,936) $ 25,088 $ (31,630)
Adjustments to net income (loss)(3)
(1,045) 1,695 24,021 651 25,519
Adjustments for impact of preferred stock redemption — 3,347 (49) 3,347 (575)
Adjusted net income (loss) available to common stockholders(2)
$ 16,278 $ 12,867 $ 2,036 $ 29,086 $ (6,686)
Average diluted common shares 50,892,202 50,750,522 50,030,919 50,810,285 50,247,848
Diluted EPS $ 0.34 $ 0.15 $ (0.44) $ 0.49 $ (0.63)
Adjusted diluted EPS(2)
$ 0.32 $ 0.25 $ 0.04 $ 0.57 $ (0.13)

~~(1)Adjustments shown net of an effective tax rate of 25%~~

~~(2)Non-GAAP measure.~~

~~(3)~~(4)Represents ~~the difference between net income and~~ adjusted net income available to common stockholders divided by average diluted common shares.

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RESULTS OF OPERATIONS

Net Interest Income

The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates for the three months ended June 30, ~~2021,~~2022, March 31, ~~2021~~2022 and June 30, ~~2020:~~2021:


		Three Months Ended																						Three Months Ended
		June 30, 2021							March 31, 2021							June 30, 2020								June 30, 2022							March 31, 2022							June 30, 2021
($ in thousands)	($ in thousands)	Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/Cost		($ in thousands)	Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/ Cost		Average Balance			Interest and Dividends		Yield/Cost
Interest-earning assets:	Interest-earning assets:																						Interest-earning assets:
Total loans~~(1)~~(2)	Total loans~~(1)~~(2)	$	5,771,415		$	61,900	4.30	%	$	5,784,041		$	61,345	4.30	%	$	5,707,619		$	63,642	4.48	%	Total loans~~(1)~~(2)	$	7,269,655		$	78,895	4.35	%	$	7,262,774		$	76,234	4.26	%	$	5,771,415		$	61,900	4.30	%
Securities	Securities	1,308,230			6,986		2.14	%	1,236,138			6,501		2.13	%	1,063,941			7,816		2.95	%	Securities	1,216,612			8,124		2.68	%	1,292,079			7,309		2.29	%	1,308,230			6,986		2.14	%
Other interest-earning assets ~~(2)~~(3)	Other interest-earning assets ~~(2)~~(3)	258,915			791		1.23	%	336,443			772		0.93	%	424,776			1,239		1.17	%	Other interest-earning assets ~~(2)~~(3)	295,715			1,399		1.90	%	265,339			726		1.11	%	258,915			791		1.23	%
Total interest-earning assets	Total interest-earning assets	7,338,560			69,677		3.81	%	7,356,622			68,618		3.78	%	7,196,336			72,697		4.06	%	Total interest-earning assets	8,781,982			88,418		4.04	%	8,820,192			84,269		3.87	%	7,338,560			69,677		3.81	%
ACL		(79,103)							(81,111)							(78,528)
Allowance for loan losses																							Allowance for loan losses	(94,217)							(92,618)							(79,103)
BOLI and noninterest-earning assets ~~(3)~~(4)	BOLI and noninterest-earning assets ~~(3)~~(4)	567,549							585,441							622,398							BOLI and noninterest-earning assets ~~(3)~~(4)	654,931							664,731							567,549
Total assets	Total assets	$	7,827,006						$	7,860,952						$	7,740,206						Total assets	$	9,342,696						$	9,392,305						$	7,827,006
Interest-bearing liabilities:	Interest-bearing liabilities:																						Interest-bearing liabilities:
Interest-bearing checking	Interest-bearing checking	$	2,182,419		679		0.12	%	$	2,140,314		901		0.17	%	$	1,710,038		2,186		0.51	%	Interest-bearing checking	$	2,363,233		1,457		0.25	%	$	2,409,262		641		0.11	%	$	2,182,419		679		0.12	%
Savings		903,940			1,974		0.88	%	928,446			2,013		0.88	%	905,997			2,718		1.21	%

Money market		734,165			270		0.15	%	726,079			377		0.21	%	592,872			850		0.58	%

Savings and money market																							Savings and money market	1,598,663			860		0.22	%	1,673,244			510		0.12	%	1,638,105			2,244		0.55	%
Certificates of deposit	Certificates of deposit	633,101			620		0.39	%	720,180			995		0.56	%	1,214,939			4,451		1.47	%	Certificates of deposit	631,415			863		0.55	%	508,244			237		0.19	%	633,101			620		0.39	%
Total interest-bearing deposits	Total interest-bearing deposits	4,453,625			3,543		0.32	%	4,515,019			4,286		0.38	%	4,423,846			10,205		0.93	%	Total interest-bearing deposits	4,593,311			3,180		0.28	%	4,590,750			1,388		0.12	%	4,453,625			3,543		0.32	%
FHLB advances	FHLB advances	418,111			2,944		2.82	%	446,618			3,112		2.83	%	819,166			4,818		2.37	%	FHLB advances	485,629			3,114		2.57	%	459,749			2,953		2.60	%	418,111			2,944		2.82	%
Securities sold under repurchase agreements		—			—		—	%	—			—		—	%	1,024			2		0.79	%
Long-term debt and other interest-bearing liabilities		274,412			3,343		4.89	%	260,488			3,304		5.14	%	173,977			2,357		5.45	%

Other borrowings																							Other borrowings	117,688			325		1.11	%	116,495			55		0.19	%	17,920			4		0.09	%
Long-term debt																							Long-term debt	274,515			3,500		5.11	%	274,417			3,432		5.07	%	256,492			3,339		5.22	%
Total interest-bearing liabilities	Total interest-bearing liabilities	5,146,148			9,830		0.77	%	5,222,125			10,702		0.83	%	5,418,013			17,382		1.29	%	Total interest-bearing liabilities	5,471,143			10,119		0.74	%	5,441,411			7,828		0.58	%	5,146,148			9,830		0.77	%
Noninterest-bearing deposits	Noninterest-bearing deposits	1,767,711							1,653,517							1,349,735							Noninterest-bearing deposits	2,804,877							2,795,633							1,767,711
Noninterest-bearing liabilities	Noninterest-bearing liabilities	98,174							97,136							118,208							Noninterest-bearing liabilities	96,791							105,349							98,174
Total liabilities	Total liabilities	7,012,033							6,972,778							6,885,956							Total liabilities	8,372,811							8,342,393							7,012,033
Total stockholders’ equity	Total stockholders’ equity	814,973							888,174							854,250							Total stockholders’ equity	969,885							1,049,912							814,973
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	7,827,006						$	7,860,952						$	7,740,206						Total liabilities and stockholders’ equity	$	9,342,696						$	9,392,305						$	7,827,006
Net interest income/spread	Net interest income/spread				$	59,847	3.04	%				$	57,916	2.95	%				$	55,315	2.77	%	Net interest income/spread				$	78,299	3.30	%				$	76,441	3.29	%				$	59,847	3.04	%
Net interest margin (4)							3.27	%						3.19	%						3.09	%
Net interest margin (5)																							Net interest margin (5)						3.58	%						3.51	%						3.27	%

Ratio of interest-earning assets to interest-bearing liabilities	Ratio of interest-earning assets to interest-bearing liabilities	143		%					141		%					133		%					Ratio of interest-earning assets to interest-bearing liabilities	161		%					162		%					143		%
Total deposits(5)		6,221,336			3,543		0.23	%	6,168,536			4,286		0.28	%	5,773,581			10,205		0.71	%
Total funding (6)		6,913,859			9,830		0.57	%	6,875,642			10,702		0.63	%	6,767,748			17,382		1.03	%
Total deposits(6)																							Total deposits(6)	7,398,188			3,180		0.17	%	7,386,383			1,388		0.08	%	6,221,336			3,543		0.23	%
Total funding (7)																							Total funding (7)	8,276,020			10,119		0.49	%	8,237,044			7,828		0.39	%	6,913,859			9,830		0.57	%

(1)Includes average loans held for sale of $3.6 million, $3.4 million and $2.0 million for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively, which are included in other assets in the accompanying consolidated statements of financial condition.

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~~(1)~~(2)Total loans are net of deferred fees, related direct costs, premiums and discounts. Nonaccrual loans are included in the average balance. ~~Net~~Interest income includes net accretion ~~(amortization)~~ of deferred loan fees ~~(costs)~~ of ~~$1.0 million, $1.4 million and~~$610 thousand, $1.1 million and ~~(amortization) accretion~~$1.0 million and net amortization of ~~(premium) discount~~premium on purchased loans of $363 thousand, $(1.0) million ~~$(411) thousand~~ and ~~$347 thousand~~$(1.0) million for the three months ended June 30, ~~2021,~~2022, March 31, ~~2021~~2022 and June 30, ~~2020, respectively, are included in interest income.~~2021, respectively.

~~(2)~~(3)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.

~~(3)~~(4)Includes average balance of bank-owned life insurance of ~~$112.7~~$124.8 million, ~~$112.0~~$124.0 million and ~~$110.4~~$112.7 million for the three months ended June 30, ~~2021,~~2022, March 31, ~~2021~~2022 and June 30, ~~2020.~~2021, respectively.

~~(4)~~(5)Annualized net interest income divided by average interest-earning assets.

~~(5)~~(6)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of total deposits is calculated as annualized total interest expense on deposits divided by average total deposits.

~~(6)~~(7)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Three Months Ended June 30, ~~2021~~2022 Compared to Three Months Ended March 31, ~~2021~~2022

Net interest income increased $1.9 million to ~~$59.8~~$78.3 million for the second quarter due to ~~the~~ higher yield on ~~earning-assets, the~~interest-earning assets, offset by lower ~~cost~~average interest-earning assets and ~~volume of~~higher average interest-bearing liabilities balances and ~~the impact of one additional day in the current quarter.~~costs.

The net interest margin increased 87 basis points to ~~3.27%~~3.58% for the second quarter ~~from 3.19% for the first quarter~~ as the average ~~earning-assets~~interest-earning assets yield increased 317 basis points and the ~~average~~ cost of average total funding ~~decreased 6~~increased 10 basis points. The yield on average interest-earning assets increased to ~~3.81%~~4.04% for the second quarter from ~~3.78%~~3.87% for the first quarter due ~~mostly~~ to ~~an improved earning-asset~~ the mix ~~as excess liquidity was redeployed. Average securities increased $72.1 million while average other~~of interest-earning assets ~~decreased $77.5 million~~ and ~~loans decreased by $12.6 million.~~higher yields on loan and securities. The average yield on loans ~~remained unchanged at 4.30%~~increased 9 basis points to 4.35% during the second quarter as a result of the portfolio mix and ~~included~~the impact of higher market interest rates. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, accelerated discount accretion on the early payoff of purchased loans, and accelerated fees from PPP loan forgiveness; these items increased the ~~second quarter~~ loan yield by 1810 basis points ~~and the first quarter loan yield by 13 basis points. The average yield on securities increased 1 basis point to 2.14% between quarters, including a 4 basis points decrease~~ in ~~the average yield on collateralized loan obligations (CLOs) to 1.87% for~~both the second quarter ~~due mostly to an increase in fair value of such investments.~~

and prior quarter.

The average cost of funds ~~decreased 6~~increased 10 basis points to ~~0.57%~~0.49% for the second quarter from ~~0.63%~~0.39% for the first quarter. This ~~decrease~~increase was driven by the ~~lower~~higher average cost of interest-bearing ~~liabilities and improved funding mix, including higher average noninterest-bearing~~ deposits. During the second quarter, average deposits increased $52.8 million, consisting of higher average noninterest-bearing deposits of $114.2 million and lower average interest-bearing deposits of $61.4 million. Average noninterest-bearing deposits represented ~~28%~~38% of total average deposits for both the second quarter and the first quarter. Average noninterest-bearing deposits were $9.2 million higher in the second quarter compared to ~~27% of total~~the first quarter while average deposits were $11.8 million higher for the ~~first quarter.~~linked quarters. Average Federal Home Loan Bank (FHLB) advances ~~decreased $28.5 million due to lower average term advances during the second quarter from maturities of term advances in the first and second quarters of 2021. Average long-term debt~~ and other ~~interest-bearing liabilities~~borrowings increased ~~$13.9 million as a result of an increase in unsecured overnight borrowings from various financial institutions through the American Financial Exchange platform.~~$27.1 million. The average cost of interest-bearing liabilities ~~decreased 6~~increased 16 basis points to ~~0.77%~~0.74% for the second quarter from ~~0.83%~~0.58% for the first quarter due to ~~our continued efforts to actively manage down the~~higher cost of interest-bearing deposits. The average cost of interest-bearing deposits ~~declined 6~~increased 16 basis points to ~~0.32%~~0.28% for the second quarter from ~~0.38%~~0.12% for the first quarter. The average cost of total deposits ~~decreased 5~~increased 9 basis points to ~~0.23%~~0.17% for the second ~~quarter.~~quarter due mostly to higher market interest rates. The spot rate of total deposits was 0.21% at the end of the second ~~quarter was 0.20%.~~quarter.

Three Months Ended June 30, ~~2021~~2022 Compared to Three Months Ended June 30, ~~2020~~2021

Net interest income for the second quarter of ~~2021~~2022 increased ~~$4.5~~ $18.5 million to ~~$59.8~~$78.3 million from ~~$55.3~~$59.8 million for the same ~~2020~~2021 period. Net interest income was positively impacted by a higher average interest-earning assets, ~~lower average interest-bearing liabilities~~a higher yield on such assets, and improved funding costs, offset by ~~lower~~higher average interest-bearing liabilities. The 2022 operating results include the impact of acquiring PMB in the fourth quarter of 2021.

The net interest margin increased 31 basis points to 3.58% for the second quarter of 2022 as the average interest-earning assets yield increased 23 basis points and the average cost of total funding decreased 8 basis points. The average yield on interest-earning assets increased to 4.04% for the second quarter of 2022 from 3.81% for the same 2021 period due to the mix of interest-earning assets and higher yields on securities and other interest-earning assets as a result of higher market interest rates. The average ~~interest-earning~~Federal funds rate was 0.77% for the second quarter of 2022 compared to 0.07% for the same 2021 period. Average loans increased by $1.50 billion from ongoing loan growth, including the loans from the acquisition of PMB. The average yield on loans increased 5 basis points to 4.35% for the second quarter of 2022, compared to 4.30% for the same 2021 period. The loan yield includes the impact of prepayment penalty fees, the net reversal or recapture of nonaccrual loan interest, accelerated

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~~assets. Average interest-earning assets~~discount accretion on the early payoff of purchased loans, and accelerated fees from PPP loan forgiveness; these items increased ~~$142.2 million to $7.34 billion, and~~ the ~~net interest margin increased 18~~loan yield by 10 basis points ~~to 3.27% for~~in the second quarter of ~~2021~~2022 compared to ~~3.09% for the same 2020 period.~~

~~The net interest margin expanded due to a 46~~18 basis points ~~decrease in the average cost of funds outpacing a 25 basis points decline in average interest-earning assets yield. The average yield on interest-earning assets decreased to 3.81%~~ for ~~the second quarter of~~same 2021 ~~from 4.06% for the same 2020 period due mostly to the impact of lower market interest rates on loans and securities yields over this time~~ period. The average yield on loans was 4.30% for the second quarter of 2021, compared to 4.48% for the same 2020 period and the average yield on securities decreased 81 basis points to 2.14% due mostly to CLOs repricing into the lower rate environment.

The average cost of funds decreased 8 basis points to ~~0.57%~~0.49% for the second quarter of ~~2021,~~2022, from ~~1.03%~~0.57% for the same ~~2020~~2021 period. This decrease was driven by the lower average cost of interest-bearing liabilities ~~and the~~due to an improved funding mix, including higher average noninterest-bearing ~~deposits.~~deposits as a result of the PMB acquisition and growth from ongoing business development efforts. Average noninterest-bearing deposits represented 38% of total average deposits for the second quarter of 2022, compared to 28% for the same 2021 period. Average noninterest-bearing deposits were $1.04 billion higher in the second quarter of 2022, compared to same 2021 period, while average deposits were $1.18 billion higher. Average FHLB advances and other borrowings increased $167.3 million due mostly to higher overnight borrowings, offset by lower term advances. The average cost of interest-bearing liabilities decreased 523 basis points to ~~0.77%~~0.74% for the second quarter of ~~2021~~2022 from ~~1.29%~~0.77% for the same ~~2020~~2021 period due to the ~~combination~~funding mix including the impact of ~~actively managing deposit pricing down in~~including deposits from the lower interest rate environment and the lower average cost of FHLB term advances resulting from maturities, early termination and refinancing of certain term advances during 2020. Compared to the same 2020 period, thePMB acquisition. The average cost of interest-bearing deposits declined 614 basis points to 0.28% for the second quarter of 2022, from 0.32% ~~and~~for the same 2021 period while the average cost of total deposits decreased 486 basis points to ~~0.23%. Additionally, average noninterest-bearing deposits increased by $418.0 million or 31.0%~~0.17% for the second quarter of ~~2021 when~~2022, compared to 0.23% for the same ~~2020~~2021 period.

Table of ~~Contents~~Conte nts

The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates, on a consolidated operations basis, for the six months ended June 30, 2022 and 2021:


	Six Months Ended June 30,
	2022							2021
($ in thousands)	Average Balance			Interest and Dividends		Yield/Cost		Average Balance			Interest and Dividends		Yield/Cost
Interest-earning assets:
Total loans (1)(2)	$	7,266,234		$	155,129	4.31	%	$	5,777,693		$	123,245	4.30	%
Securities	1,254,137			15,433		2.48	%	1,272,383			13,487		2.14	%
Other interest-earning assets (3)	280,611			2,125		1.53	%	297,465			1,563		1.06	%
Total interest-earning assets	8,800,982			172,687		3.96	%	7,347,541			138,295		3.80	%
Allowance for loan losses	(93,422)							(80,102)
BOLI and noninterest-earning assets (4)	659,804							576,446
Total assets	$	9,367,364						$	7,843,885
Interest-bearing liabilities:
Interest-bearing checking	$	2,386,120		2,097		0.18	%	$	2,161,483		1,581		0.15	%


Savings and money market	1,635,747			1,371		0.17	%	1,646,269			4,634		0.57	%
Certificates of deposit	570,170			1,100		0.39	%	676,400			1,614		0.48	%
Total interest-bearing deposits	4,592,037			4,568		0.20	%	4,484,152			7,829		0.35	%
FHLB advances	472,760			6,067		2.59	%	432,286			6,056		2.83	%

Other borrowings	117,095			379		0.65	%	11,061			6		0.11	%
Long-term debt	274,466			6,933		5.09	%	256,427			6,641		5.22	%
Total interest-bearing liabilities	5,456,358			17,947		0.66	%	5,183,926			20,532		0.80	%
Noninterest-bearing deposits	2,800,281							1,710,930
Noninterest-bearing liabilities	101,048							97,658
Total liabilities	8,357,687							6,992,514
Total stockholders’ equity	1,009,677							851,371
Total liabilities and stockholders’ equity	$	9,367,364						$	7,843,885
Net interest income/spread				$	154,740	3.30	%				$	117,763	3.00	%
Net interest margin (5)						3.55	%						3.23	%

Ratio of interest-earning assets to interest-bearing liabilities	161		%					142		%
Total deposits(6)	7,392,318			4,568		0.12	%	6,195,082			7,829		0.25	%
Total funding (7)	8,256,639			17,947		0.44	%	6,894,856			20,532		0.60	%

(1)Includes average loans held for sale of $3.5 million and $1.7 million for the six months ended June 30, 2022 and 2021, ~~and 2020:~~

Six Months Ended June 30,
2021 2020
($ in thousands) Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost
Interest-earning assets:
Total loans (1)
$ 5,777,693 $ 123,245 4.30 % $ 5,744,214 $ 129,176 4.52 %
Securities 1,272,383 13,487 2.14 % 1,008,454 15,636 3.12 %
Other interest-earning assets (2)
297,465 1,563 1.06 % 361,110 2,599 1.45 %
Total interest-earning assets 7,347,541 138,295 3.80 % 7,113,778 147,411 4.17 %
ACL (80,102) (69,499)
BOLI and noninterest-earning assets (3)
576,446 607,296
Total assets $ 7,843,885 $ 7,651,575
Interest-bearing liabilities:
Interest-bearing checking $ 2,161,483 1,581 0.15 % $ 1,615,480 5,915 0.74 %
Savings 916,125 3,987 0.88 % 898,414 6,013 1.35 %
Money market 730,144 647 0.18 % 600,899 2,610 0.87 %
Certificates of deposit 676,400 1,614 0.48 % 1,183,229 10,278 1.75 %
Total interest-bearing deposits 4,484,152 7,829 0.35 % 4,298,022 24,816 1.16 %
FHLB advances 432,286 6,056 2.83 % 929,110 10,701 2.32 %
Securities sold under repurchase agreements — — — 512 2 0.79 %
Long-term debt and other interest-bearing liabilities 267,488 6,647 5.01 % 174,017 4,716 5.45 %
Total interest-bearing liabilities 5,183,926 20,532 0.80 % 5,401,661 40,235 1.50 %
Noninterest-bearing deposits 1,710,930 1,241,521
Noninterest-bearing liabilities 97,658 123,244
Total liabilities 6,992,514 6,766,426
Total stockholders’ equity 851,371 885,149
Total liabilities and stockholders’ equity $ 7,843,885 $ 7,651,575
Net interest income/spread $ 117,763 3.00 % $ 107,176 2.67 %
Net interest margin (4)
3.23 % 3.03 %
Ratio of interest-earning assets to interest-bearing liabilities 142 % 132 %
Total deposits(5)
6,195,082 7,829 0.25 % 5,539,543 24,816 0.90 %
Total funding (6)
6,894,856 20,532 0.60 % 6,643,182 40,235 1.22 %
respectively, which are included in other assets in the accompanying consolidated statements of financial condition.

5558

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~~(1)~~(2)Total loans are net of deferred fees, related direct costs, premiums and discounts, but exclude the allowance for credit losses. Nonaccrual loans are included in the average balance. Net accretion (amortization) of deferred loan fees (costs) of ~~$2.4~~$1.7 million and ~~$553 thousand~~$2.4 million and (amortization) accretion of (premium) discount on purchased loans of $(591) thousand and $(1.4) million ~~and $355 thousand~~ for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, are included in interest income.

~~(2)~~(3)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.

~~(3)~~(4)Includes average balance of bank-owned life insurance of ~~$112.4~~$124.4 million and ~~$110.2~~$112.4 million for the six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

~~(4)~~(5)Annualized net interest income divided by average interest-earning assets.

Six Months Ended June 30, ~~2021~~2022 Compared to Six Months Ended June 30, ~~2020~~2021

Net interest income increased $37.0 million to $154.7 million for the six months ended June 30, ~~2021 increased $10.6 million~~2022 due to ~~$117.8 million from $107.2 million for the same 2020 period. Net interest income was positively impacted by~~ higher average balances and yield on interest-earning assets, higher average balances and lower costs of interest-bearing liabilities.

The net interest margin increased 32 basis points to 3.55% as the average ~~interest-bearing liabilities~~earning-assets yield increased 16 basis points and ~~improved~~the average cost of total funding ~~costs, offset by lower yields~~decreased 16 basis points. The yield on ~~average interest-earning assets. For the six months ended June 30, 2021,~~ average interest-earning assets increased ~~$233.8 million~~ to ~~$7.35 billion, and the net interest margin increased 20 basis points to 3.23%~~3.96% for the six months ended June 30, 2022, from 3.80% for 2021 due mostly to the mix of interest-earning assets and higher market interest rates. Average loans represented 83% of average earnings assets in 2022 compared to ~~3.03%~~79% for the same ~~2020 period.~~

~~The net interest margin expanded due to a 62 basis point decrease~~period in 2021. Average loans increased by $1.49 billion from ongoing loan growth, including the acquisition of PMB in the ~~average cost~~fourth quarter of ~~funds outpacing a 37 basis point decline in the average interest-earning assets yield.~~2021. The ~~average~~ yield on ~~interest-earning assets decreased to 3.80%~~average loans for the six months ended June 30, ~~2021, from 4.17%~~2022 was 4.31% compared to 4.30% for the same ~~2020~~ period ~~due mostly to the impact of lower market interest rates~~in 2021. The yield on ~~loan~~average investment securities and ~~securities yields over this time period. The average fed funds rate~~other interest-earning assets increased 34 basis points and 47 basis points, respectively, for the six months ended June 30, ~~2021 was 0.08%~~2022, compared to ~~0.66% for~~ the same ~~2020 period.~~ period in 2021.

The average ~~yield on loans was 4.30%~~cost of funds decreased 16 basis points to 0.44% for the six months ended June 30, ~~2021, compared to 4.52% for the same 2020 period and the average yield on securities decreased 98 basis points to 2.14% due mostly to CLOs repricing into the lower rate environment.~~

~~The average cost of funds decreased to~~2022 from 0.60% for ~~the six months ended June 30, 2021, from 1.22% for the same 2020 period.~~2021. This decrease was driven by the lower average cost of interest-bearing liabilities and the overall improved funding mix, including higher average noninterest-bearing ~~deposits.~~deposits as a result of growth from the acquisition of PMB and continuous business development efforts. Average noninterest-bearing deposits represented 38% of total average deposits for the six months ended June 30, 2022 compared to 28% for the same period in 2021. Average noninterest-bearing deposits were $1.09 billion higher during the six months ended June 30, 2022 compared to the same period in 2021 while average total deposits were $1.20 billion higher. Average FHLB advances and other borrowings increased $146.5 million due mostly to higher overnight borrowings offset by lower term advances. The average cost of interest-bearing liabilities decreased 7014 basis points to ~~0.80%~~0.66% for the six months ended June 30, 2021 from 1.50% for the same 2020 period due to the combination of actively managing deposit pricing down in the lower interest rate environment and the lower average cost of FHLB term advances resulting from maturities, early termination and refinancing of certain term advances during 2020. Compared2022 compared to the same ~~2020~~ period in 2021. This included a 15 basis points decline in the average cost of interest-bearing deposits ~~declined 81 basis points~~ to ~~0.35% and the average cost of total deposits decreased 65 basis points to 0.25%. Additionally, average noninterest-bearing deposits increased by $469.4 million, or 37.8%,~~0.20% for the six months ended June 30, ~~2021 when~~2022 compared to 0.35% for the same ~~2020 period.~~period in 2021. The average cost of total deposits decreased 13 basis points to 0.12% for the six months ended June 30, 2022.

5659

Table of ~~Contents~~Conte nts

Rate/Volume Analysis

The following table presents the changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities. The information provided presents the changes attributable to: (i) changes in volume multiplied by the prior rate; and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.


		Three Months Ended June 30, 2021 vs. 2020						Six Months Ended June 30, 2021 vs. 2020												Three Months Ended June 30, 2022 vs. 2021			Six Months Ended June 30, 2022 vs. 2021
			Increase (Decrease) Due to					Net Increase (Decrease)		Increase (Decrease) Due to						Net Increase (Decrease)						Increase (Decrease) Due to		Net Increase (Decrease)			Increase (Decrease) Due to								Net Increase (Decrease)
($ In thousands)	($ In thousands)			Volume			Rate					Volume			Rate			($ In thousands)					Volume			Net Increase (Decrease)					Volume						Net Increase (Decrease)
Interest and dividend income:	Interest and dividend income:																				Interest and dividend income:
Total loans	Total loans				$	736		$	(2,478)	$	(1,742)		$	706		$	(6,637)	$	(5,931)		Total loans			$	16,267				$	728			$	16,995			$	31,598			$	286			$	31,884
Securities	Securities				1,579			(2,409)		(830)			3,478			(5,627)		(2,149)			Securities			(518)			1,656				1,138				(194)				2,140				1,946
Other interest-earning assets	Other interest-earning assets				(509)			61		(448)			(410)			(626)		(1,036)			Other interest-earning assets			123			485				608				(93)				655				562
Total interest and dividend income	Total interest and dividend income				$	1,806		$	(4,826)	$	(3,020)		$	3,774		$	(12,890)	$	(9,116)		Total interest and dividend income			$	15,872		$	2,869			$	18,741			$	31,311			$	3,081			$	34,392
Interest expense:	Interest expense:																				Interest expense:
Interest-bearing checking	Interest-bearing checking				$	483		$	(1,990)	$	(1,507)		$	1,524		$	(5,858)	$	(4,334)		Interest-bearing checking			$	55		$	723			$	778			$	177			$	339			$	516
Savings					(6)			(738)		(744)			116			(2,142)		(2,026)
Money market					168			(748)		(580)			459			(2,422)		(1,963)

Savings and money market																					Savings and money market			(411)			(973)				(1,384)				(756)				(2,507)				(3,263)
Certificates of deposit	Certificates of deposit				(1,512)			(2,319)		(3,831)			(3,216)			(5,448)		(8,664)			Certificates of deposit			(2)			245				243				(234)				(280)				(514)
FHLB advances	FHLB advances				(2,675)			801		(1,874)			(6,622)			1,977		(4,645)			FHLB advances			447			(277)				170				545				(534)				11
Securities sold under repurchase agreements					(1)			(1)		(2)			(1)			(1)		(2)
Long-term debt and other interest-bearing liabilities					1,250			(264)		986			2,339			(408)		1,931

Other borrowings																					Other borrowings			104			217				321				246				127				373
Long-term debt																					Long-term debt			227			(66)				161				460				(168)				292
Total interest expense	Total interest expense				(2,293)			(5,259)		(7,552)			(5,401)			(14,302)		(19,703)			Total interest expense			420			(131)				289				438				(3,023)				(2,585)
Net interest income	Net interest income				$	4,099		$	433	$	4,532		$	9,175		$	1,412	$	10,587		Net interest income			$	15,452		$	3,000			$	18,452			$	30,873			$	6,104			$	36,977

Provision for Credit Losses

The provision for credit losses is charged to operations to adjust the allowance for credit losses to the level required to cover current expected credit losses in our loan portfolio and unfunded commitments. The following table presents the components of our provision for credit losses:


		Three Months Ended						Six Months Ended June 30,					Three Months Ended						Six Months Ended June 30,
($ in thousands)	($ in thousands)	June 30, 2021		March 31, 2021		June 30, 2020		2020		2019		($ in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		2022		2021
(Reversal of) provision for loan losses	(Reversal of) provision for loan losses	$	(2,608)	$	(1,284)	$	11,519	$	(3,892)	$	26,230	(Reversal of) provision for loan losses	$	(500)	$	(31,342)	$	(2,608)	$	(31,842)	$	(3,892)
Provision for (reversal of) credit losses - unfunded loan commitments		454		177		307		631		1,357
(Reversal of) provision for credit losses - unfunded loan commitments												(Reversal of) provision for credit losses - unfunded loan commitments	500		(200)		454		300		631

Total (reversal of) provision for credit losses	Total (reversal of) provision for credit losses	$	(2,154)	$	(1,107)	$	11,826	$	(3,261)	$	27,587	Total (reversal of) provision for credit losses	$	—	$	(31,542)	$	(2,154)	$	(31,542)	$	(3,261)

~~Table of Contents~~

Three Months Ended June 30, ~~2021~~2022 Compared to Three Months Ended March 31, ~~2021~~2022

~~The~~There was no provision for credit losses ~~was a reversal of $2.2 million~~ for the second quarter, compared to a reversal of ~~$1.1~~$31.5 million for the first quarter. The first quarter reversal of credit losses included $31.3 million related to a recovery from the settlement of a loan previously charged-off in 2019.

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

There was no provision for credit losses for the second quarter of 2022, compared to a reversal of $2.2 million for the same 2021 period. The second quarter reversal of credit losses in the second quarter of 2021 was due primarily to improvements in

Table of Conte nts

key macro-economic forecast variables, such as ~~unemployment~~employment and gross domestic product, and consideration of credit quality ~~metrics, offset by higher period end loan balances of $221.1 million.~~metric.

~~Three~~Six Months Ended June 30, ~~2021~~2022 Compared to ~~Three~~Six Months Ended June 30, ~~2020~~2021

~~The~~During the six months ended June 30, 2022, the provision for credit losses was a reversal of ~~$2.2~~$31.5 million, ~~for the second quarter of 2021,~~ compared to a provision of $11.8 million for the same 2020 period. The lower provision for credit losses was due primarily to improvements in key macro-economic forecast variables, such as unemployment and gross domestic product, and consideration of credit quality metrics, offset by higher period end loan balances of $357.8 million.

~~Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020~~

~~The provision for credit losses was~~ a reversal of $3.3 million during 2021. The higher reversal of credit losses for the six months ended June 30, ~~2021, compared to a provision of $27.6 million during the same 2020 period. The lower provision for credit losses~~2022 was due ~~primarily~~ to ~~improvements~~the recovery from the settlement of a loan previously charged-off in ~~key macro-economic forecast variables, such as unemployment and gross domestic product, and consideration of credit quality metrics, offset by higher period end loan balances of $357.8 million.~~2019.

See further discussion in "Allowance for Credit Losses."

Noninterest Income

The following table presents the components of noninterest income for the periods indicated:


		Three Months Ended						Six Months Ended June 30,					Three Months Ended						Six Months Ended June 30,
($ in thousands)	($ in thousands)	June 30, 2021		March 31, 2021		June 30, 2020		2021		2020		($ in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		2022		2021
Customer service fees	Customer service fees	$	1,990	$	1,758	$	1,224	$	3,748	$	2,320	Customer service fees	$	2,578	$	2,434	$	1,990	$	5,012	$	3,748
Loan servicing income	Loan servicing income	38		268		95		306		170		Loan servicing income	109		212		38		321		306
Income from bank owned life insurance	Income from bank owned life insurance	690		672		591		1,362		1,169		Income from bank owned life insurance	810		796		690		1,606		1,362

Net gain on sale of securities available-for-sale	Net gain on sale of securities available-for-sale	—		—		2,011		—		2,011		Net gain on sale of securities available-for-sale	—		16		—		16		—
Fair value adjustment on loans held-for-sale		20		—		25		20		(1,561)
Net loss on sale of loans		—		—		—		—		(27)

Other income	Other income	1,432		1,683		1,582		3,115		3,507		Other income	3,689		2,452		725		6,141		2,836
Total noninterest income	Total noninterest income	$	4,170	$	4,381	$	5,528	$	8,551	$	7,589	Total noninterest income	$	7,186	$	5,910	$	3,443	$	13,096	$	8,252

Three Months Ended June 30, ~~2021~~2022 Compared to Three Months Ended March 31, ~~2021~~2022

Noninterest income ~~decreased $211 thousand,~~increased $1.3 million to ~~$4.2~~$7.2 million for the second quarter of 2022 compared to the prior quarter due mostly to ~~lower servicing income as a result of reductions in servicing balances from payoffs and repurchases and lower~~higher other income. All other income ~~from fluctuations in customer swap activity, offset by higher customer service fees. Customer service fees~~ increased ~~by $232 thousand~~$1.2 million due to higher ~~loan fees~~income from equity investments of ~~$91~~$2.1 million, partially offset by a fair value write-down of $455 thousand ~~due~~recorded on loans held for sale and the first quarter including a $771 thousand gain related to ~~extension fees~~a sale-leaseback transaction; there were no sale-leaseback transactions in the second quarter. Gains or losses from equity investments are recorded based on the most recent information available from the investee and ~~higher deposit activity fees of $140 thousand attributed to higher average deposit balances and our initiative to bring our service fee schedules more in line with market.~~

fluctuate based on their underlying performance.

Three Months Ended June 30, ~~2021~~2022 Compared to Three Months Ended June 30, ~~2020~~2021

Noninterest income for the second quarter of ~~2021 decreased $1.4~~2022 increased $3.7 million to ~~$4.2~~$7.2 million compared to the same ~~2020~~2021 period. The ~~decrease~~increase in noninterest income was ~~mainly~~ due mostly to an increase in customer services fees and other income and reflected a ~~decrease in net gains from sales of securities offset by higher customer service fees. The were no gains from sale of securities for the second~~full quarter of ~~2021, compared to $2.0 million in net gains in the same 2020 period~~activity from the ~~sale~~acquisition of ~~$20.7 million in securities, primarily consisting of corporate securities.~~PMB. The ~~$766~~$588 thousand increase in customer services fees was due ~~to higher loan fees of $210 thousand and higher deposit and interchange fees of $555 thousand. The increase in deposit activity fees is attributed~~mostly to higher average deposit ~~balances, and our initiative~~balances. The $3.0 million increase in other income was due mostly to ~~bring our service fee schedules more in line with market.~~higher income from equity investments of $2.9 million.

~~Table of Contents~~

Six Months Ended June 30, ~~2021~~2022 Compared to Six Months Ended June 30, ~~2020~~2021

Noninterest income for the six months ended June 30, ~~2021~~2022 increased ~~$1.0~~$4.8 million to ~~$8.6~~$13.1 million compared to the same ~~2020~~2021 period. The increase in noninterest income reflected a full six months of activity from the acquisition of PMB and was mainly due to higher customer service fees, income from bank-owned life insurance, and ~~lower fair value adjustment for loans held for sale, offset by lower net gain on sale of securities. The $1.4 million increase in customer~~all other income. Customer services fees ~~was~~increased $1.3 million due mostly to higher ~~loan fees of $363 thousand and higher deposit and interchange fees of $1.1 million. The increase in~~ deposit activity fees isof $1.8 million attributed to higher average deposit balances, and our initiative to bring our service fee schedules more in line with market. Fair value adjustment for loans held for sale improved $1.6 million as the comparable period included valuation losses on loans held for saleoffset by lower loan fees of $594 thousand. Income from bank-owned life insurance increased $244 thousand due to higher average balances from PMB. The $3.3 million increase in all other income is due mostly to higher income from equity investments of $2.4 million and a $771 thousand gain related to a sale-leaseback transaction during the ~~impact~~first quarter of the decreases in market interest rates; there were no similar losses in 2021. There were no gains from sale of securities for the six months ended June 30, 2021, compared to $2.0 million in net gains in the same 2020 period from the sale of $20.7 million in securities, primarily consisting of corporate securities.2022.

Table of Conte nts

Noninterest Expense

The following table presents the breakdown of noninterest expense for the periods indicated:


		Three Months Ended						Six Months Ended June 30,					Three Months Ended						Six Months Ended June 30,
($ in thousands)	($ in thousands)	June 30, 2021		March 31, 2021		June 30, 2020		2021		2020		($ in thousands)	June 30, 2022		March 31, 2022		June 30, 2021		2022		2021
Salaries and employee benefits	Salaries and employee benefits	$	25,042	$	25,719	$	24,260	$	50,761	$	47,696	Salaries and employee benefits	$	28,264	$	28,987	$	25,042	$	57,251	$	50,761
Naming rights termination		—		—		26,769		—		26,769

Occupancy and equipment	Occupancy and equipment	7,277		7,196		7,090		14,473		14,333		Occupancy and equipment	7,876		7,855		7,277		15,731		14,473
Professional fees	Professional fees	1,749		4,022		4,596		5,771		10,560		Professional fees	4,107		2,907		1,749		7,014		5,771

Data processing	Data processing	1,621		1,655		1,536		3,276		3,309		Data processing	1,782		1,828		1,621		3,610		3,276
Advertising		78		118		1,157		196		2,913

Regulatory assessments	Regulatory assessments	769		774		725		1,543		1,209		Regulatory assessments	1,021		775		769		1,796		1,543
Reversal of provision for loan repurchases	Reversal of provision for loan repurchases	(99)		(132)		(34)		(231)		(634)		Reversal of provision for loan repurchases	(490)		(471)		(99)		(961)		(231)
Amortization of intangible assets	Amortization of intangible assets	282		282		430		564		859		Amortization of intangible assets	313		441		282		754		564

Merger-related costs	Merger-related costs	700		700		—		1,400		—		Merger-related costs	—		—		700		—		1,400

All other expense	All other expense	3,969		2,771		6,408		6,740		10,937		All other expense	4,696		4,116		3,320		8,812		6,637
Noninterest expense before (gain) loss on investments in alternative energy partnerships		41,388		43,105		72,937		84,493		117,951
(Gain) loss on investments in alternative energy partnerships		(829)		3,630		(167)		2,801		1,738
Noninterest expense before loss (gain) on investments in alternative energy partnerships												Noninterest expense before loss (gain) on investments in alternative energy partnerships	47,569		46,438		40,661		94,007		84,194
Loss (gain) on investments in alternative energy partnerships												Loss (gain) on investments in alternative energy partnerships	1,043		158		(829)		1,201		2,801
Total noninterest expense	Total noninterest expense	$	40,559	$	46,735	$	72,770	$	87,294	$	119,689	Total noninterest expense	$	48,612	$	46,596	$	39,832	$	95,208	$	86,995

Three Months Ended June 30, ~~2021~~2022 Compared to Three Months Ended March 31, ~~2021~~2022

Noninterest expense ~~decreased $6.2~~increased $2.0 million to ~~$40.6~~$48.6 million for the second quarter compared to the prior quarter. The ~~decrease~~increase was ~~primarily~~ due mostly to ~~lower~~(i) higher professional fees of ~~$2.3~~$1.2 million, related mainly to higher legal fees and (ii) higher net ~~gain~~loss in alternative energy partnership investments of ~~$4.5 million,~~$885 thousand. These increases were offset by a decrease in salaries and employee benefits of $723 thousand attributed to higher ~~all other expense~~payroll-related items typical of ~~$1.2 million.~~the first quarter. Professional fees included ~~net recoveries of indemnified legal expenses of $1.3 million in the second quarter compared to~~ net indemnified legal expenses of ~~$721 thousand during the first quarter. The increase in all other expense was due to a $1.2 million increase in net losses on equity investments due to net losses of $727~~$455 thousand in the second quarter compared to net ~~gains~~recoveries of ~~$428~~$106 thousand induring the first quarter.

Total operating costs, defined as noninterest expense adjusted for certain expense items (refer to section Non-GAAP Measures), increased $570 thousand to $47.1 million for the second quarter compared to $46.5 million for the prior quarter. ~~Our equity investments without readily determinable fair values include investments in privately held companies~~This increase was due mostly to the combination of (i) higher professional fees of $639 thousand related to business initiatives, (ii) higher all other expenses of $580 thousand related mostly to loan-related expenses, and ~~limited partnerships~~(iii) lower salaries and ~~our income or loss from these investments fluctuates based on their underlying performance.~~

~~Table~~benefits of ~~Contents~~$723 thousand due to the higher payroll-related items typical of the first quarter.

Three Months Ended June 30, ~~2021~~2022 Compared to Three Months Ended June 30, ~~2020~~2021

Noninterest expense was ~~$40.6~~$48.6 million for the second quarter of ~~2021, a decrease~~2022, an increase of ~~$32.2~~$8.8 million from ~~$72.8~~$39.8 million for the comparable ~~2020 period.~~2021 period due mostly to including PMB's operations since the date of acquisition. The ~~decrease was mainly due to~~increase included (i) the same 2020 period including a $26.8 million one-time charge related to the termination of our LAFC naming rights agreements and a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances, (ii) lower professional fees of $2.8 million, due to overall reductions in indemnified legal fees for resolved legal proceedings and various other litigations, (iii) lower advertising costs of $1.1 million due to the termination of our LAFC agreements in May 2020, (iv) lower all other expenses of $2.4 million resulting from the aforementioned debt extinguishment fee and (v) a higher gain on alternative energy partnerships of $662 thousand from decreased loss sharing allocations. These increases were offset by higher salaries and employee benefits of ~~$782~~$3.2 million due to a higher number of employees, (ii) higher occupancy and equipment of $599 thousand, due to additional facilities, (iii) higher ~~commissions~~professional fees of $2.4 million, due mostly to higher legal fees, net of insurance recoveries (iv) higher loss on investments in alternative energy partnerships of $1.9 million, and ~~incentive-based compensation and~~(iv) higher all other expense of $1.4 million. These increases were offset by lower merger-related costs of $700 thousand ~~associated with our proposed merger with PMBC~~resulting from completion of the PMB acquisition and system conversion in the fourth quarter of 2021.

Six Months Ended June 30, ~~2021~~2022 Compared to Six Months Ended June 30, ~~2020~~2021

Noninterest expense for the six months ended June 30, ~~2021 decreased $32.4~~2022 increased $8.2 million to ~~$87.3~~$95.2 million compared to the prior ~~year.~~year due mostly to including PMB's operations since the date of acquisition. The ~~decrease~~increase was primarily due to: (i) the same 2020 period including a $26.8 million one-time charge related to the termination of our LAFC naming rights agreements and a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances, (ii) lower professional fees of $4.8 million, due to overall reductions in indemnified legal fees for resolved legal proceedings and various other litigations, (iii) lower advertising fees of $2.7 million due to the termination of our LAFC agreements in May 2020 and (iv) lower all other expense of $4.2 million resulting from overall expense reduction efforts, the comparable 2020 period including the aforementioned $2.5 million debt extinguishment fee and a $1.2 million charge to settle and conclude two legacy legal matters, and a $304 thousand increase in loss on equity investments between periods. These decreases were partially offset by higher ~~(i)~~ salaries and employee benefits of ~~$3.1~~$6.5 million, (ii) higher occupancy and equipment of $1.3 million, (iii) higher professional fees of $1.2 million, due mostly to a $1.9 million increase in legal fees, net of insurance recoveries, offset by a $619 thousand decrease in other professional fees and (iv) higher ~~commissions and incentive-based compensation,~~all other expenses of $2.2 million. These increases were partially offset by: (i) higher reversal of loan repurchase reserves of $730 thousand, (ii) lower merger-related costs of $1.4 million ~~associated with our proposed merger with PMBC,~~ and (iii) ~~net losses~~lower loss in alternative energy partnership investments of ~~$1.1~~$1.6 million.

Table of Conte nts

Income Tax ~~(Benefit)~~ Expense

For the three months ended June 30, ~~2021,~~2022, March 31, ~~2021~~2022 and June 30, ~~2020,~~2021, income tax expense ~~(benefit)~~ was ~~$6.6~~$10.2 million, ~~$2.3~~$18.8 million, and ~~$(5.3)~~$6.6 million, resulting in an effective tax rate of ~~25.6%~~27.6%, ~~13.8%~~27.9% and ~~22.3%~~25.6%, respectively. ~~Our 25.6%~~The effective tax rate for ~~the three months ended June 30, 2021 differs from the 29.5% statutory rate due to the impact of various permanent tax differences, tax credits and other discrete items. Our effective tax rate~~2022 is expected to be insimilar to the ~~25% to 27% range~~effective income tax rate for the ~~remainder of 2021.~~second quarter.

~~For~~Income tax expense totaled $28.9 million for the six months ended June 30, ~~2021 and 2020, income taxes were~~2022, representing an ~~expense~~effective tax rate of 27.8%, compared to $8.9 million and ~~a benefit of $7.5 million, resulting in~~ an effective tax rate of 20.9% ~~and 23.0%, respectively. During~~for 2021. The effective tax rate for the six months ended June 30, 2022 was higher than the comparable 2021 ~~income~~period due mostly to the first quarter of 2021 including a net tax ~~expense included a~~benefit of $2.1 million ~~tax benefit~~resulting from the exercise of all previously issued outstanding stock appreciation rights.

For additional information, see Note 8 to Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q.

FINANCIAL CONDITION

Investment Securities

~~At June 30, 2021, all of our investment securities were classified as available-for-sale.~~

The primary goal of our investment securities portfolio is to provide a relatively stable source of interest income while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk, and interest rate risk. Certain investment securities provide a source of liquidity as collateral for FHLB advances, Federal Reserve Discount Window capacity, repurchase agreements, and certain public deposits.

Investment Securities Held-to-Maturity

Securities held-to-maturity totaled $329.3 million at June 30, 2022 and included $215.1 million in agency securities and $114.2 million in municipal securities. During the first quarter of 2022, we transferred certain longer-duration fixed-rate mortgage-backed securities and municipal securities from the available-for-sale portfolio to the held-to-maturity portfolio to lower the adverse impact rising interest rates may have on the fair value of such securities. At the time of the transfer, the securities had an unrealized gross loss of $16.6 million, which along with the related unrealized loss in accumulated other comprehensive income, is amortized into interest income as a yield adjustment over the remaining term of the securities. As a result, there is no impact on the consolidated statements of operations.

The following table presents the amortized cost and fair value of investment securities held-to-maturity as of the dates indicated:


	June 30, 2022						December 31, 2021
($ in thousands)	Amortized Cost		Fair Value		Unrealized Gain (Loss)		Amortized Cost		Fair Value		Unrealized Gain (Loss)
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	153,621	$	135,287	$	(18,334)	$	—	$	—	$	—
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	61,447		53,396		(8,051)		—		—		—
Municipal securities	114,204		96,989		(17,215)		—		—		—



Total securities held-to-maturity	$	329,272	$	285,672	$	(43,600)	$	—	$	—	$	—

Table of ~~Contents~~Conte nts

Investment Securities Available-for-Sale

The following table presents the amortized cost and fair value of the investment securities available for sale portfolio and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income as of the dates indicated:


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
($ in thousands)	($ in thousands)	Amortized Cost		Fair Value		Unrealized Gain (Loss)		Amortized Cost		Fair Value		Unrealized Gain (Loss)		($ in thousands)	Amortized Cost		Fair Value		Unrealized Gain (Loss)		Amortized Cost		Fair Value		Unrealized Gain (Loss)
Securities available-for-sale:	Securities available-for-sale:													Securities available-for-sale:
SBA loan pool securities	SBA loan pool securities	$	16,301	$	16,223	$	(78)	$	17,436	$	17,354	$	(82)	SBA loan pool securities	$	13,085	$	13,062	$	(23)	$	14,679	$	14,591	$	(88)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	191,029		197,685		6,656		99,591		106,384		6,793		U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	12,051		11,365		(686)		190,382		191,969		1,587
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	262,515		265,184		2,669		209,426		211,831		2,405		U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	160,657		154,053		(6,604)		242,458		241,541		(917)
Municipal securities	Municipal securities	117,996		120,980		2,984		64,355		68,623		4,268		Municipal securities	—		—		—		117,913		119,015		1,102
Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	151		155		4		156		160		4		Non-agency residential mortgage-backed securities	53,122		45,481		(7,641)		56,014		56,025		11

Collateralized loan obligations	Collateralized loan obligations	587,275		584,307		(2,968)		687,505		677,785		(9,720)		Collateralized loan obligations	492,775		478,203		(14,572)		521,275		518,964		(2,311)
Corporate debt securities	Corporate debt securities	156,988		168,620		11,632		141,975		149,294		7,319		Corporate debt securities	165,266		163,271		(1,995)		162,002		173,598		11,596
Total securities available-for-sale	Total securities available-for-sale	$	1,332,255	$	1,353,154	$	20,899	$	1,220,444	$	1,231,431	$	10,987	Total securities available-for-sale	$	896,956	$	865,435	$	(31,521)	$	1,304,723	$	1,315,703	$	10,980

Securities available-for-sale were ~~$1.35 billion~~$865.4 million at June 30, ~~2021, an increase~~2022, a decrease of ~~$121.7~~$450.3 million, or ~~9.9%~~34.2%, from ~~$1.23~~$1.32 billion at December 31, ~~2020.~~2021. The ~~increase~~decrease was mainly due to the aforementioned transfer of certain securities to the held-to-maturity portfolio, collateralized loan obligation (CLO) payoffs of $28.5 million, principal payments of $20.2 million, sales of $17.6 million and higher unrealized net losses of $42.5 million, offset by purchases of ~~$226.8~~$5.0 million.

Net unrealized losses on securities available-for-sale were $31.5 million ~~including $158.1~~at June 30, 2022, compared to a net unrealized gain of $11.0 million at December 31, 2021. The net unrealized gain or loss on securities available-for-sale, net of tax, is reflected in ~~U.S. government agency securities, $53.7 million~~accumulated other comprehensive income. Increases in ~~municipal securities and $15.0 million~~longer term market interest rates resulted in ~~corporate securities and~~ higher net unrealized ~~gains of $9.9 million, offset by calls~~losses in our securities portfolio and ~~redemptions of CLOs totaling $100.2 million~~stockholders’ equity. As market interest rates increase, bond prices tend to fall and, ~~principal reductions of $14.0 million. The increase in unrealized net gains was due mostly to improved pricing of CLOs and corporate debt securities due to lower credit spreads, offset by decreases in~~consequently, the fair value of ~~municipal~~our securities may also decrease. To this end, we may have further net unrealized losses on our securities classified as available–for-sale, which would negatively affect our total and ~~mortgage-backed securities as a result of increases in longer term interest rates during the year.~~tangible stockholders’ equity.

CLOs totaled ~~$584.3~~$478.2 million and ~~$677.8~~$519.0 million and were all AAA and AA rated at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. We perform due diligence and ongoing credit quality review of our CLO holdings, which includes monitoring performance factors such as external credit ratings, collateralization levels, collateral concentration levels, and other performance factors.

We did not record credit impairment for any investment securities for the three and six months ended June 30, ~~2021~~2022 or ~~2020.~~2021. We monitor our securities portfolio to ensure it has adequate credit ~~support.~~support and we consider the lowest credit rating for identification of potential credit impairment. As of June 30, ~~2021,~~2022, we believe there was no credit impairment and we did not have the current intent to sell securities with a fair value below amortized cost at June 30, ~~2021,~~2022, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. ~~We consider the lowest credit rating for identification of potential credit impairment.~~ As of June 30, ~~2021,~~2022, all of our investment securities in an unrealized loss position received an investment grade credit rating. The overall net ~~increase~~decreases in fair value during the ~~year~~period were attributable to a combination of changes in interest rates and credit market conditions.

Table of ~~Contents~~Conte nts

The following table presents ~~maturities,~~the fair values and weighted average yields using amortized cost of the securities held-to-maturity portfolio as of June 30, 2022, based on the earlier of contractual maturity dates or next repricing ~~dates,~~dates:


	One Year or Less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total
($ in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield
Securities held-to-maturity:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	$	—	—	%	$	—	—	%	$	—	—	%	$	135,287	2.69	%	$	135,287	2.69	%
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	—		—	%	—		—	%	—		—	%	53,396		2.64	%	53,396		2.64	%
Municipal securities	—		—	%	—		—	%	17,134		2.19	%	79,855		2.71	%	96,989		2.62	%



Total securities held-to-maturity	$	—	—	%	$	—	—	%	$	17,134	2.19	%	$	268,538	2.68	%	$	285,672	2.66	%

The following table presents the fair values and ~~yield information~~weighted average yields using amortized cost of the ~~investment~~ securities available-for-sale portfolio as of June 30, ~~2021:~~2022, based on the earlier of contractual maturity dates or next repricing dates:


		One Year or Less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total					One Year or Less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total
($ in thousands)	($ in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		($ in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield
Securities available-for-sale:	Securities available-for-sale:																					Securities available-for-sale:
SBA loan pools securities	SBA loan pools securities	$	16,223	1.53	%	$	—	—	%	$	—	—	%	$	—	—	%	$	16,223	1.53	%	SBA loan pools securities	$	13,062	1.06	%	$	—	—	%	$	—	—	%	$	—	—	%	$	13,062	1.06	%
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	29,694		2.20	%	167,991		2.15	%	197,685		2.15	%	U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities	—		—	%	—		—	%	11,365		2.23	%	—		—	%	11,365		2.23	%
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	109,168		0.64	%	11,360		1.98	%	43,331		1.34	%	101,325		1.80	%	265,184		1.25	%	U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations	86,602		1.73	%	9,630		2.24	%	35,518		1.55	%	22,303		1.81	%	154,053		1.73	%
Municipal securities		—		—	%	—		—	%	15,469		2.62	%	105,511		2.38	%	120,980		2.41	%

Non-agency residential mortgage-backed securities	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	155		6.35	%	155		6.35	%	Non-agency residential mortgage-backed securities	—		—	%	—		—	%	—		—	%	45,481		2.51	%	45,481		2.51	%

Collateralized loan obligations	Collateralized loan obligations	584,307		1.82	%	—		—	%	—		—	%	—		—	%	584,307		1.82	%	Collateralized loan obligations	478,203		2.70	%	—		—	%	—		—	%	—		—	%	478,203		2.70	%
Corporate debt securities	Corporate debt securities	—		—	%	150,108		4.82	%	18,512		5.73	%	—		—	%	168,620		4.91	%	Corporate debt securities	—		—	%	149,641		4.71	%	13,630		5.73	%	—		—	%	163,271		4.80	%
Total securities available-for-sale	Total securities available-for-sale	$	709,698	1.64	%	$	161,468	4.62	%	$	107,006	2.41	%	$	374,982	2.12	%	$	1,353,154	2.17	%	Total securities available-for-sale	$	577,867	2.52	%	$	159,271	4.56	%	$	60,513	2.52	%	$	67,784	2.29	%	$	865,435	2.87	%

6265

Table of ~~Contents~~Conte nts

~~Loans Held-for-Sale~~

Total loans held-for-sale carried at fair value were $2.9 million at June 30, 2021 and $1.4 million at December 31, 2020 and consisted mainly of repurchased conforming SFR mortgage loans that were previously sold and repurchased GNMA loans that were previously sold and became delinquent more than 90 days.

Loans Receivable, Net

The following table presents the composition of our loan and lease portfolio as of the dates indicated:


($ in thousands)	($ in thousands)	June 30, 2021		December 31, 2020		Amount Change		Percentage Change		($ in thousands)	June 30, 2022		December 31, 2021		Amount Change		Percentage Change
Commercial:	Commercial:									Commercial:
Commercial and industrial(1)	Commercial and industrial(1)	$	2,070,910	$	2,088,308	$	(17,398)	(0.8)	%	Commercial and industrial(1)	$	2,433,464	$	2,668,984	$	(235,520)	(8.8)	%
Commercial real estate	Commercial real estate	871,790		807,195		64,595		8.0	%	Commercial real estate	1,204,414		1,311,105		(106,691)		(8.1)	%
Multifamily	Multifamily	1,325,770		1,289,820		35,950		2.8	%	Multifamily	1,572,308		1,361,054		211,254		15.5	%
SBA~~(1)~~(2)	SBA~~(1)~~(2)	253,924		273,444		(19,520)		(7.1)	%	SBA~~(1)~~(2)	92,235		205,548		(113,313)		(55.1)	%
Construction	Construction	150,557		176,016		(25,459)		(14.5)	%	Construction	228,341		181,841		46,500		25.6	%

Total commercial loans										Total commercial loans	5,530,762		5,728,532		(197,770)		(3.5)	%
Consumer:	Consumer:									Consumer:
Single family residential mortgage	Single family residential mortgage	1,288,176		1,230,236		57,940		4.7	%	Single family residential mortgage	1,832,279		1,420,023		412,256		29.0	%

Other consumer	Other consumer	24,350		33,386		(9,036)		(27.1)	%	Other consumer	88,223		102,925		(14,702)		(14.3)	%
Total loans(2)		5,985,477		5,898,405		87,072		1.5	%
Total consumer loans										Total consumer loans	1,920,502		1,522,948		397,554		26.1	%
Total loans(3)										Total loans(3)	7,451,264		7,251,480		199,784		2.8	%
Allowance for loan losses	Allowance for loan losses	(75,885)		(81,030)		5,145		(6.3)	%	Allowance for loan losses	(93,793)		(92,584)		(1,209)		1.3	%
Total loans receivable, net	Total loans receivable, net	$	5,909,592	$	5,817,375	$	92,217	1.6	%	Total loans receivable, net	$	7,357,471	$	7,158,896	$	198,575	2.8	%

(1)Includes ~~994~~warehouse lending balances of $1.16 billion and $1.60 billion at June 30, 2022 and December 31, 2021.

(2)Includes 79 PPP loans totaling ~~$193.9~~$28.4 million, net of unamortized loan fees totaling ~~$3.9 million~~$10 thousand at June 30, ~~2021~~2022 and ~~949~~397 PPP loans totaling ~~$210.0~~$123.1 million, net of unamortized loan fees totaling ~~$1.6 million~~$772 thousand at December 31, ~~2020.~~2021.

~~(2)~~(3)Total loans include net deferred loan origination costs (fees), purchased premiums (discounts), and fair value allocations of premiums (discounts) ~~of $7.9~~totaling $14.4 million and ~~$6.2~~$5.5 million at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

~~Held-for-investment~~Gross loans increased ~~$87.1~~$199.8 million to ~~$5.99~~$7.45 billion from December 31, ~~2020, resulting from higher~~2021 due to loan fundings of $2.18 billion, including single-family residential purchases of $641.5 million. During the first quarter of 2022, $150.1 million of owner-occupied commercial real estate loans ~~of $64.6 million, multifamily loans of $36.0 million and single family residential loans of $57.9 million, offset by lower~~acquired in the PMB acquisition were moved to the other commercial and industrial ~~(C&I) loans of $17.4 million due, in part, to decreased utilization of credit facilities and lower construction loans of $25.5 million due to prepayment activity.~~category from the commercial real estate category. SBA loans ~~also~~ decreased by ~~$19.5~~$113.3 million due mostly from the SBA processing forgiveness ~~requests of $157.8 million offset by $143.7 million in new PPP loans originated.~~requests. At June 30, ~~2021,~~2022, SBA loans included ~~$193.9~~$28.4 million of PPP loans, ~~net of fees.~~compared to $123.1 million at December 31, 2021.

Total commercial loans, excluding PPP loans and warehouse lending, increased $256.2 million, or 25.1% on an annualized basis during the second quarter.

~~During the year, we purchased $366.0 million in loans, comprised of single family residential loans of $336.2 million and multifamily loans of $29.8 million.~~

We continue to focus the real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and commercial real estate loans. As of June 30, ~~2021,~~2022, loans secured by residential real estate (single-family, multifamily, single-family construction, warehouse lending credit facilities and ~~credit facilities)~~commercial real estate) represent approximately ~~69%~~66% of our total loans outstanding.

~~Table of Contents~~

Credit Quality Indicators

Table of Conte nts

The following table presents the risk categories for total loans by class of loans as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total		($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2021
June 30, 2022												June 30, 2022
Commercial:	Commercial:											Commercial:
Commercial and industrial	Commercial and industrial	$	1,970,948	$	52,099	$	47,712	$	151	$	2,070,910	Commercial and industrial	$	2,316,651	$	45,405	$	71,408	$	—	$	2,433,464
Commercial real estate	Commercial real estate	828,933		26,558		15,158		1,141		871,790		Commercial real estate	1,186,719		3,679		14,016		—		1,204,414
Multifamily	Multifamily	1,268,917		54,908		1,945		—		1,325,770		Multifamily	1,537,480		16,133		18,695		—		1,572,308
SBA	SBA	238,512		3,168		11,763		481		253,924		SBA	75,278		5,221		11,736		—		92,235
Construction	Construction	141,443		9,114		—		—		150,557		Construction	219,794		8,547		—		—		228,341

Consumer:	Consumer:											Consumer:
Single family residential mortgage	Single family residential mortgage	1,254,045		11,002		23,129		—		1,288,176		Single family residential mortgage	1,817,068		6,218		8,993		—		1,832,279
Other consumer	Other consumer	24,159		92		99		—		24,350		Other consumer	87,727		145		351		—		88,223
Total	Total	$	5,726,957	$	156,941	$	99,806	$	1,773	$	5,985,477	Total	$	7,240,717	$	85,348	$	125,199	$	—	$	7,451,264


($ in thousands)	($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total		($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2020
December 31, 2021												December 31, 2021
Commercial:	Commercial:											Commercial:
Commercial and industrial	Commercial and industrial	$	2,019,701	$	17,232	$	51,375	$	—	$	2,088,308	Commercial and industrial	$	2,550,540	$	65,659	$	52,785	$	—	$	2,668,984
Commercial real estate	Commercial real estate	760,612		30,485		16,098		—		807,195		Commercial real estate	1,292,837		4,845		13,423		—		1,311,105
Multifamily	Multifamily	1,284,995		2,853		1,972		—		1,289,820		Multifamily	1,312,038		46,314		2,702		—		1,361,054
SBA	SBA	264,851		3,275		4,837		481		273,444		SBA	181,129		6,040		18,379		—		205,548
Construction	Construction	167,485		8,531		—		—		176,016		Construction	171,731		10,110		—		—		181,841

Consumer:	Consumer:											Consumer:
Single family residential mortgage	Single family residential mortgage	1,202,758		11,853		15,625		—		1,230,236		Single family residential mortgage	1,395,785		10,423		13,815		—		1,420,023
Other consumer	Other consumer	31,823		1,215		348		—		33,386		Other consumer	102,538		92		295		—		102,925
Total	Total	$	5,732,225	$	75,444	$	90,255	$	481	$	5,898,405	Total	$	7,006,598	$	143,483	$	101,399	$	—	$	7,251,480

Loans risk rated special mention ~~increased $81.5~~decreased $58.1 million to ~~$156.9~~$85.3 million at June 30, ~~2021~~2022 compared to ~~$75.4~~$143.5 million at December 31, ~~2020~~2021 due mostly to ~~downgrades of certain multifamily and~~activity within the commercial and industrial and multifamily loans ~~offset by loan~~that included payoffs of $25.5 million and ~~loan amortization.~~net migration out of special mention of $27.7 million. Loans risk rated substandard increased ~~$9.6~~$23.8 million to ~~$99.8~~$125.2 million at June 30, ~~2021~~2022 compared to ~~$90.3~~$101.4 million at December 31, ~~2020~~2021 due mostly to ~~downgrades~~the addition of ~~certain single family residential~~one multifamily loan for $17.5 million and three commercial and industrial relationships of $19.6 million. There were no loans risk rated doubtful at June 30, 2022 and ~~the repurchase of $6.5 million of guaranteed SBA loans pending resolution, offset by upgrades and payoffs.~~December 31, 2021.

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The commercial and industrial ("C&I&I") portfolio has limited exposure to certain business sectors undergoing severe stress as a result of the pandemic. The C&I industry concentrations in dollars and as a percentage of total outstanding C&I loan balances are summarized below:


		June 30, 2021					June 30, 2022
($ in thousands)	($ in thousands)	Amount		% of Portfolio		($ in thousands)	Amount		% of Portfolio
C&I Portfolio by Industry	C&I Portfolio by Industry					C&I Portfolio by Industry
Finance and Insurance - Warehouse Lending	Finance and Insurance - Warehouse Lending	$	1,345,314	65	%	Finance and Insurance - Warehouse Lending	$	1,160,157	48	%
Real Estate & Rental Leasing		192,323		9	%
Real Estate and Rental Leasing						Real Estate and Rental Leasing	245,013		10	%
Finance and Insurance - Other	Finance and Insurance - Other	84,528		4	%	Finance and Insurance - Other	161,287		7	%
Manufacturing						Manufacturing	120,619		5	%
Healthcare						Healthcare	92,321		4	%
Arts, Entertainment & Recreation						Arts, Entertainment & Recreation	67,369		3	%
Television / Motion Pictures						Television / Motion Pictures	65,522		3	%
Gas Stations	Gas Stations	73,169		4	%	Gas Stations	62,347		3	%
Healthcare		71,941		3	%
Other Retail Trade						Other Retail Trade	56,132		2	%
Construction						Construction	46,795		2	%
Professional Services						Professional Services	45,217		2	%
Wholesale Trade	Wholesale Trade	40,757		2	%	Wholesale Trade	43,901		2	%
Manufacturing		34,086		2	%
Television / Motion Pictures		30,002		1	%
Management of Companies and Enterprises						Management of Companies and Enterprises	37,561		2	%
Food Services	Food Services	29,371		1	%	Food Services	36,593		2	%
Other Retail Trade		28,999		1	%
Professional Services		19,448		1	%
Educational Services						Educational Services	34,473		1	%
Transportation	Transportation	4,739		—	%	Transportation	18,551		1	%
Accommodations	Accommodations	2,200		—	%	Accommodations	8,922		—	%
All Other	All Other	114,033		6	%	All Other	130,684		5	%
Total	Total	$	2,070,910	100	%	Total	$	2,433,464	100	%

Non-Traditional Mortgage Portfolio ("NTM")

~~Our~~ NTM loans are included in our SFR mortgage portfolio isand are comprised of ~~three interest-only products: Green Loans, Interest Only~~interest only loans and ~~a small number~~Green Loans. While we no longer originate SFR loans, we have and may continue to purchase pools of ~~additional~~loans that include NTM loans with maturities of up to 40 years and flexible initial repricing dates, ranging from 1 to 10 years, and periodic repricing dates through the ~~potential for negative amortization.~~ life of the loan.

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the NTM ~~portfolio~~loans totaled ~~$462.6~~$841.1 million, or ~~7.7%~~11.3% of ~~the~~ total ~~gross loan portfolio,~~loans, and ~~$437.1~~$635.3 million, or ~~7.4%~~8.8% of total loans, respectively. Interest only loans are primarily SFR first mortgage loans that generally have a 30 to 40-year term at the ~~total gross loan portfolio.~~ time of origination and include payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At June 30, 2022 and December 31, 2021, interest only loans totaled $833.6 million and $613.3 million. Green Loans are SFR first and second mortgage lines of credit with a linked checking account that allows all types of deposits and withdrawals to be performed. Green Loans are generally interest only for a 15-year term with a balloon payment due at maturity. At June 30, 2022 and December 31, 2021, Green Loans totaled $7.4 million and $21.9 million.

The total NTM portfolio increased by ~~$25.5~~$205.8 million, or ~~5.8%~~32.4% during the six months ended June 30, ~~2021.~~2022. The increase was primarily due to loan purchases, offset by principal paydowns and payoffs. ~~We no longer originate~~

At June 30, 2022 and December 31, 2021, nonperforming NTM loans ~~however loans were purchased which meet the criteria to be considered NTM loans. NTM loans~~totaled zero and $4.0 million.

Non-Traditional Mortgage Performance Indicators

Our risk management policy and credit monitoring include reviewing delinquency, FICO scores, and LTV ratios on nonaccrual status included $5.9 million of Green Loans and $3.4 million of Interest Only loans at June 30, 2021 compared to $4.0 million of Green Loans and $4.7 million of Interest Only loans at December 31, 2020.

~~The initial credit guidelines for~~ the NTM ~~portfolio were established based on the borrower's Fair Isaac Corporation (“FICO”) score, loan-to-value ("LTV") ratio, property type, occupancy type,~~ loan ~~amount, and geography. Additionally, from an ongoing credit risk management perspective, we~~portfolio. We also regularly monitor market conditions for our geographic lending areas. We have determined that the most significant performance indicators for ~~NTMs~~NTM loans are LTV ratios and FICO scores. We review the NTM loan portfolio at least quarterly, which includes refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models (“AVMs”) to confirm collateral values.

~~Green Loans, including first and second liens, totaled $30.4 million at~~At June 30, ~~2021,~~2022, our NTM first lien portfolio had a ~~decrease~~weighted average LTV of ~~$2.8~~approximately 60%. At June 30, 2022, $3.5 million or ~~8.4% from $33.2~~50% of our $7.0 million ~~at December 31, 2020. The following table presents our~~ Green Loans first lien portfolio ~~at June 30, 2021 by~~had FICO scores ~~that were obtained during the quarter ended June 30, 2021, compared to the FICO scores for those same loans that were obtained during the quarter ended December 31, 2020:~~

By FICO Scores Obtained
During the Quarter Ended
June 30, 2021
By FICO Scores Obtained
During the Quarter Ended
December 31, 2020
Change
($ in thousands) Count Amount Percent Count Amount Percent Count Amount Percent
FICO Score
800+ 10 $ 3,184 11.1 % 10 $ 5,143 17.9 % — $ (1,959) (38.1) %
700-799 23 20,042 69.6 % 22 15,974 55.5 % 1 4,068 25.5 %
600-699 6 4,772 16.6 % 7 6,881 23.9 % (1) (2,109) (30.6) %
<600 1 272 0.9 % 1 272 0.9 % — — — %
No FICO 2 526 1.8 % 2 526 1.8 % — — — %
Totals 42 $ 28,796 100.0 % 42 $ 28,796 100.0 % — $ — — %
of 700 or greater.

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~~Loan-to-Value Ratio~~

LTV ratio represents estimated current loan to value ratio, determined by dividing the current unpaid principal balance by the latest estimated property value received per our policy. The table below represents our single family residential NTM first lien portfolio by LTV ratio ranges as of the dates indicated:

($ in thousands) Green Interest Only Negative Amortization Total
LTV ratio range Count Amount Percent Count Amount Percent Count Amount Percent Count Amount Percent
June 30, 2021
< 61% 40 $ 26,526 92.1 % 192 $ 281,970 65.5 % 5 $ 1,690 100.0 % 237 $ 310,186 67.3 %
61-80% 2 2,270 7.9 % 97 144,999 33.7 % — — — % 99 147,269 31.9 %
81-100% — — — % — — — % — — — % — — — %
> 100% — — — % 1 3,519 0.8 % — — — % 1 3,519 0.8 %
Total 42 $ 28,796 100.0 % 290 $ 430,488 100.0 % 5 $ 1,690 100.0 % 337 $ 460,974 100.0 %
December 31, 2020
< 61% 42 $ 25,946 82.1 % 190 $ 271,108 67.5 % 8 $ 2,288 100.0 % 240 $ 299,342 68.7 %
61-80% 6 5,641 17.9 % 91 126,281 31.4 % — — — % 97 131,922 30.3 %
81-100% — — — % 2 4,251 1.1 % — — — % 2 4,251 1.0 %
> 100% — — — % — — — % — — — % — — — %
Total 48 $ 31,587 100.0 % 283 $ 401,640 100.0 % 8 $ 2,288 100.0 % 339 $ 435,515 100.0 %

~~Table of Contents~~nts

Nonperforming Assets

The following table presents a summary of total nonperforming assets, excluding loans held-for-sale, as of the dates indicated:


($ in thousands)	($ in thousands)	June 30, 2021			December 31, 2020			Amount Change		Percentage Change		($ in thousands)	June 30, 2022			December 31, 2021			Amount Change		Percentage Change
Loans past due 90 days or more still on accrual	Loans past due 90 days or more still on accrual	$	—		$	728		$	(728)	(100.0)	%	Loans past due 90 days or more still on accrual	$	—		$	—		$	—	—	%
Nonaccrual loans	Nonaccrual loans	51,299			35,900			15,399		42.9	%	Nonaccrual loans	44,443			52,558			(8,115)		(15.4)	%
Total nonperforming loans	Total nonperforming loans	51,299			36,628			14,671		40.1	%	Total nonperforming loans	44,443			52,558			(8,115)		(15.4)	%
Other real estate owned	Other real estate owned	3,253			—			3,253		—	%	Other real estate owned	—			—			—		—	%
Total nonperforming assets	Total nonperforming assets	$	54,552		$	36,628		$	17,924	48.9	%	Total nonperforming assets	$	44,443		$	52,558		$	(8,115)	(15.4)	%
Performing restructured loans (1)	Performing restructured loans (1)	$	6,029		$	4,733		$	1,296	27.4	%	Performing restructured loans (1)	$	10,946		$	12,538		$	(1,592)	(12.7)	%
Total nonperforming loans to total loans		0.86		%	0.62		%
Nonaccrual loans to total loans												Nonaccrual loans to total loans	0.60		%	0.72		%
Nonperforming loans to total loans												Nonperforming loans to total loans	0.60		%	0.72		%
Total nonperforming assets to total assets	Total nonperforming assets to total assets	0.68		%	0.46		%					Total nonperforming assets to total assets	0.47		%	0.56		%
ALL to nonperforming loans	ALL to nonperforming loans	147.93		%	221.22		%					ALL to nonperforming loans	211.04		%	176.16		%
ACL to nonperforming loans	ACL to nonperforming loans	155.36		%	229.91		%					ACL to nonperforming loans	224.33		%	186.82		%

(1) Excluded from nonperforming loans

Loans are generally placed on nonaccrual status when they become 90 days past due, unless management believes the loan is well secured and in the process of collection. Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where we believe the borrower will eventually overcome those circumstances and repay the loan in full.

Additional interest income of approximately ~~$702~~$694 thousand and ~~$1.2~~$1.3 million would have been recorded during the three and six months ended June 30, ~~2021,~~2022, had these loans been paid in accordance with their original terms throughout the periods indicated.

Non-performing loans ~~increased $14.7~~decreased $8.1 million to ~~$51.3~~$44.4 million as of June 30, ~~2021,~~2022, of which ~~$32.0~~$18.4 million, or ~~62%~~41%, relates to loans in a current payment status. The ~~increase~~decrease was due mostly to ~~$34.0~~$11.1 million in payoffs, paydowns, and charge-offs and $6.7 million in loans returning to accrual status, offset by additions of $9.7 million. Of the $9.7 million of loans placed on non-accrual status, including $6.6 million in guaranteed SBA loans that were repurchased and are pending resolution, offset by $19.3 million in cured loans and payoffs. Of the $34.0 million of loans placed on non-accrual status, $23.8$7.2 million, related to SFR loans.

At June 30, ~~2021,~~2022, non-performing loans included (i) a ~~legacy relationship~~$12.4 million commercial and industrial loan acquired in the PMB acquisition, (ii) SBA loans totaling ~~$7.2~~$10.5 million, ~~that~~of which $8.6 million is ~~well-secured by a combination of commercial real estate and SFR properties with an average loan-to-value ratio of 50%, (ii)~~guaranteed, (iii) SFR loans totaling ~~$21.2 million, (iii) repurchased guaranteed SBA loans of $6.6~~$7.3 million, and (iv) other commercial loans of ~~$16.3 million.~~

~~At June 30, 2021, non-performing assets includes other real estate, consisting of one SFR property, totaling $3.3~~$13.9 million.

Troubled Debt Restructurings

Loans that we modify or restructure where the debtor is experiencing financial difficulties and makes a concession to the borrower in a below-market change in the stated interest rate, a reduction in the loan balance or accrued interest, an extension of the maturity date, or a note split with principal forgiveness are classified as troubled debt restructurings (“TDRs”). TDRs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition. A workout plan between a borrower and us is designed to provide a bridge for the cash flow shortfalls in the near term. If the borrower works through the near term issues, in most cases, the original contractual terms of the loan will be reinstated.

At each June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~11 and 13~~18 loans classified as TDRs, with an aggregate balance of ~~$9.1~~$25.9 million and ~~$9.0~~$16.7 million. When a loan becomes a TDR, we cease accruing interest, and classify it as nonaccrual until the borrower demonstrates that the loan is again performing. The increase in TDRs during the six months ended June 30, ~~2021~~2022 was ~~primarily~~ due mostly to ~~one single family residential~~modifying the $12.4 million non-performing commercial and industrial loan ~~totaling $1.8 million.~~acquired in the PMB acquisition, offset by paydowns and payoffs.

At June 30, ~~2021,~~2022, of the 1118 loans classified as TDRs, 810 loans totaling ~~$6.0~~$10.9 million were making payments according to their modified terms and were less than 90 days delinquent under the modified terms and, as such, were on accruing status. At December 31, ~~2020,~~2021, of the 1318 loans classified as TDRs, 1011 loans totaling ~~$4.7~~$12.5 million were making payments according to their modified terms and were less than 90 days delinquent under the modified terms and, as such, were on accruing status.

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~~Troubled Debt Restructuring (TDR) Relief:~~ In order to encourage banks to work with impacted borrowers, the CARES Act and U.S. banking regulatory agencies have provided relief from TDR accounting. The main benefits of TDR relief include i) a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; ii) a delinquency status benefit, as the aging of loans are frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and iii) a nonaccrual status benefit as the loans are generally not reported as nonaccrual during the modification period. Refer to "Borrower Payment Relief Efforts" above for additional information regarding CARES Act deferrals.

Allowance for Credit Losses (ACL)

The ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on historical and peer loss data, current loan portfolio risk profile including risk ratings, and economic forecasts including ~~macroeconomic variables (MEVs)~~MEVs released by ~~our~~the model provider during June ~~2021. In contrast to the March 2021~~2022. The published forecasts ~~the assumptions in the June 2021 forecasts generally reflect a more favorable view of the economy (i.e.~~consider rising inflation, higher GDP growth rates and lower unemployment rates). While the June 2021 forecasts reflect an improving economy with the rollout of the vaccine and other factors, there continues to be uncertainty regarding the impact of inflation (lasting or transitory), COVID-19 variantsoil prices, ongoing supply chain issues and the ~~ultimate pace of the recovery. Accordingly, our economic assumptions~~military conflict between Russia and ~~the resulting ACL level and provision reversal consider both the positive assumptions and potential uncertainties.~~ Ukraine, among other factors.

The ~~allowance for expected credit losses (ACL),~~ACL, which includes the reserve for unfunded loan commitments, totaled ~~$79.7~~$99.7 million, or ~~1.33%~~1.34% of total loans, at June 30, ~~2021,~~2022, compared to ~~$84.2~~$98.2 million, or ~~1.43%~~1.35% of total loans, at December 31, ~~2020.~~2021. The ~~$4.5~~$1.5 million ~~decrease~~increase in the ACL was due primarily to: (i) ~~lower general reserves of $4.4 million from~~growth in the loan portfolio, ~~mix,~~ including ~~higher balances, offset by improved economic assumptions~~unfunded commitments, and ~~asset quality trends,~~ (ii) ~~net charge-offs of $1.3 million, and (iii) other changes in~~higher specific reserves of ~~$1.1~~$1.2 million. Changes in portfolio mix and improved credit quality, in addition to net recoveries of $1.8 million, offset the reserves needed due to growth. The $31.3 million recovery in the first quarter of 2022 from the settlement of a loan previously charged-off in 2019 also resulted in a reversal of provision for credit losses and therefore had no net impact on the ACL. The ACL coverage of non-performing loans was ~~155%~~224% at June 30, ~~2021~~2022 compared to ~~230%~~187% at December 31, ~~2020.~~2021.

The reserve for unfunded loan commitments was established to cover the current expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required.

The following table provides a summary of components of the allowance for credit losses and related ratios as of the dates indicated:


($ in thousands)	($ in thousands)	June 30, 2021			December 31, 2020			($ in thousands)	June 30, 2022			December 31, 2021

Allowance for credit losses:	Allowance for credit losses:							Allowance for credit losses:
Allowance for loan losses (ALL)	Allowance for loan losses (ALL)	$	75,885		$	81,030		Allowance for loan losses (ALL)	$	93,793		$	92,584
Reserve for unfunded loan commitments	Reserve for unfunded loan commitments	3,814			3,183			Reserve for unfunded loan commitments	5,905			5,605
Total allowance for credit losses (ACL)	Total allowance for credit losses (ACL)	$	79,699		$	84,213		Total allowance for credit losses (ACL)	$	99,698		$	98,189

ALL to total loans	ALL to total loans	1.27		%	1.37		%	ALL to total loans	1.26		%	1.28		%
ACL to total loans	ACL to total loans	1.33		%	1.43		%	ACL to total loans	1.34		%	1.35		%
ACL to total loans, excluding PPP loans	ACL to total loans, excluding PPP loans	1.38		%	1.48		%	ACL to total loans, excluding PPP loans	1.34		%	1.39		%

~~Table of Contents~~

The following tables provide summaries of activity in the allowance for credit losses for the periods indicated:


		Three Months Ended June 30,												Three Months Ended June 30,
($ in thousands)	($ in thousands)	2021						2020							($ in thousands)	2022						2021
		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses				Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses
Balance at beginning of period	Balance at beginning of period	$	79,353	$	3,360	$	82,713	$	78,243	$	3,888	$	82,131		Balance at beginning of period	$	93,226	$	5,405	$	98,631	$	79,353	$	3,360	$	82,713

Loans charged off	Loans charged off	(886)		—		(886)		—		—		—			Loans charged off	(494)		—		(494)		(886)		—		(886)
Recoveries of loans previously charged off	Recoveries of loans previously charged off	26		—		26		608		—		608			Recoveries of loans previously charged off	1,561		—		1,561		26		—		26
Net (charge-offs) recoveries		(860)		—		(860)		608		—		608
Net recoveries (charge-offs)															Net recoveries (charge-offs)	1,067		—		1,067		(860)		—		(860)

(Reversal of) provision for credit losses	(Reversal of) provision for credit losses	(2,608)		454		(2,154)		11,519		307		11,826			(Reversal of) provision for credit losses	(500)		500		—		(2,608)		454		(2,154)
Balance at end of period	Balance at end of period	$	75,885	$	3,814	$	79,699	$	90,370	$	4,195	$	94,565		Balance at end of period	$	93,793	$	5,905	$	99,698	$	75,885	$	3,814	$	79,699

Table of Conte nts


		Six Months Ended June 30,												Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021						2020							($ in thousands)	2022						2021
		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses				Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses		Allowance for Loan Losses		Reserve for Unfunded Loan Commitments		Allowance for Credit Losses
Balance at beginning of period	Balance at beginning of period	$	81,030	$	3,183	$	84,213	$	57,649	$	4,064	$	61,713		Balance at beginning of period	$	92,584	$	5,605	$	98,189	$	81,030	$	3,183	$	84,213
Impact of adopting ASU 2016-13(1)		—		—		—		7,609		(1,226)		6,383

Loans charged off	Loans charged off	(1,451)		—		(1,451)		(2,076)		—		(2,076)			Loans charged off	(725)		—		(725)		(1,451)		—		(1,451)
Recoveries of loans previously charged off	Recoveries of loans previously charged off	198		—		198		958		—		958			Recoveries of loans previously charged off	33,776		—		33,776		198		—		198
Net charge-offs	Net charge-offs	(1,253)		—		(1,253)		(1,118)		—		(1,118)			Net charge-offs	33,051		—		33,051		(1,253)		—		(1,253)

Provision for (reversal of) credit losses		(3,892)		631		(3,261)		26,230		1,357		27,587
(Reversal of) provision for credit losses															(Reversal of) provision for credit losses	(31,842)		300		(31,542)		(3,892)		631		(3,261)
Balance at end of period	Balance at end of period	$	75,885	$	3,814	$	79,699	$	90,370	$	4,195	$	94,565		Balance at end of period	$	93,793	$	5,905	$	99,698	$	75,885	$	3,814	$	79,699

~~(1)~~
~~Represents~~

The following table presents a summary of net (charge-offs) recoveries and the ~~impact~~annualized ratio of ~~adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As~~net charge-offs to average loans by loan class for the periods indicated:


	Three Months Ended June 30,
($ in thousands)	2022						2021
	Net (Charge-offs) Recoveries		Average Loans		Annualized (Charge-off) Recovery Ratio		Net (Charge-offs) Recoveries		Average Loans		Annualized (Charge-off) Recovery Ratio
Commercial:
Commercial and industrial	$	1,262	$	2,457,281	0.21	%	$	(477)	$	1,884,793	(0.10)	%
Commercial real estate	—		1,213,438		—	%	—		878,252		—	%
Multifamily	—		1,457,185		—	%	—		1,272,841		—	%
SBA	(136)		70,225		(0.77)	%	(383)		269,718		(0.57)	%
Construction	—		219,029		—	%	—		162,391		—	%

Consumer:
Single family residential mortgage	154		1,755,719		0.04	%	—		1,277,552		—	%
Other consumer	(213)		93,160		(0.91)	%	—		23,881		—	%
Total loans	$	1,067	$	7,266,037	0.06	%	$	(860)	$	5,769,428	(0.06)	%

Net recoveries were $1.1 million during the second quarter of 2022, compared to net charge-offs of $860 thousand during the comparable 2021 period. The increase in net recoveries between periods was mainly due to net recoveries within the commercial and industrial portfolio.

Table of Conte nts


	Six Months Ended June 30,
($ in thousands)	2022						2021
	Net (Charge-offs) Recoveries		Average Loans		Annualized (Charge-off) Receovery Ratio		Net (Charge-offs) Recoveries		Average Loans		Annualized (Charge-off) Receovery Ratio
Commercial:
Commercial and industrial	$	32,497	$	2,544,351	2.55	%	$	(997)	$	1,916,788	(0.10)	%
Commercial real estate	—		1,267,891		—	%	—		873,589		—	%
Multifamily	—		1,398,452		—	%	—		1,277,812		—	%
SBA	609		93,062		1.31	%	(257)		271,029		(0.19)	%
Construction	—		203,996		—	%	—		166,571		—	%
Lease financing	—		—		—	%	—		—		—	%
Consumer:
Single family residential mortgage	182		1,659,633		0.02	%	—		1,244,015		—	%
Other consumer	(237)		95,326		(0.50)	%	1		26,188		0.01	%
Total loans	$	33,051	$	7,262,711	0.91	%	$	(1,253)	$	5,775,992	(0.04)	%

Net recoveries were $33.1 million during the six months ended June 30, 2022, compared to net charge-offs of $1.3 million during the comparable 2021 period. The increase in net recoveries between periods was mainly due to a ~~result~~$31.3 million recovery from the settlement of ~~adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on~~ a ~~current expected credit loss methodology, rather that the~~loan previously ~~applied incurred loss methodology.~~charged-off in 2019.

The following table provides a summary of the allocation of the allowance for loan losses by loan category as well as loans receivable for each category as of the dates indicated:


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
($ in thousands)	($ in thousands)	Allowance for Loan Losses		Loans Receivable		% of Loans in Category to Total Loans		Allowance for Loan Losses		Loans Receivable		% of Loans in Category to Total Loans		($ in thousands)	Allowance for Loan Losses		Loans Receivable		% of Loans in Category to Total Loans		Allowance for Loan Losses		Loans Receivable		% of Loans in Category to Total Loans
Commercial:	Commercial:													Commercial:
Commercial and industrial	Commercial and industrial	$	20,156	$	2,070,910	34.6	%	$	20,608	$	2,088,308	35.3	%	Commercial and industrial	$	41,413	$	2,433,464	32.6	%	$	33,557	$	2,668,984	36.8	%
Commercial real estate	Commercial real estate	16,424		871,790		14.6	%	19,074		807,195		13.7	%	Commercial real estate	15,742		1,204,414		16.2	%	21,727		1,311,105		18.1	%
Multifamily	Multifamily	21,403		1,325,770		22.2	%	22,512		1,289,820		21.9	%	Multifamily	15,678		1,572,308		21.1	%	17,893		1,361,054		18.8	%
SBA	SBA	3,696		253,924		4.2	%	3,145		273,444		4.6	%	SBA	3,033		92,235		1.2	%	3,017		205,548		2.8	%
Construction	Construction	4,734		150,557		2.5	%	5,849		176,016		3.0	%	Construction	4,255		228,341		3.1	%	5,622		181,841		2.5	%

Consumer:	Consumer:													Consumer:
Single family residential mortgage	Single family residential mortgage	9,108		1,288,176		21.5	%	9,191		1,230,236		20.9	%	Single family residential mortgage	12,805		1,832,279		24.6	%	9,608		1,420,023		19.6	%
Other consumer	Other consumer	364		24,350		0.4	%	651		33,386		0.6	%	Other consumer	867		88,223		1.2	%	1,160		102,925		1.4	%

Total	Total	$	75,885	$	5,985,477	100.0	%	$	81,030	$	5,898,405	100.0	%	Total	$	93,793	$	7,451,264	100.0	%	$	92,584	$	7,251,480	100.0	%

Servicing Rights

We have retained servicing rights from certain sales of SFR mortgage loans and SBA loans. In the second quarter of 2022, we also purchased mortgage servicing rights from unrelated third parties. Purchased mortgage servicing rights are recorded at the purchase price at the time of acquisition, which approximates the fair value. Subsequent to acquisition, we account for these servicing rights using the amortization method. We utilize a subservicer to service the loans underlying the purchased mortgage servicing rights.

Mortgage servicing rights totaled $24.0 million and $1.3 million at June 30, 2022 and December 31, 2021. We purchased $22.8 million of SFR mortgage servicing rights during the second quarter of 2022. The unpaid principal balance of the loans underlying these purchased servicing rights is approximately $1.73 billion at June 30, 2022 and these loans are not included in our consolidated statements of financial condition.

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Table of ~~Contents~~Conte nts

~~The following table provides information regarding activity by loan class in the allowance for loan losses during the periods indicated:~~

Three Months Ended
June 30, Six Months Ended
June 30,
($ in thousands) 2021 2020 2021 2020
ALL at beginning of period $ 79,353 $ 78,243 $ 81,030 $ 57,649
Impact of adopting ASU 2016-13(1)
— — — 7,609
Charge-offs:
Commercial and industrial (500) — (1,065) (1,164)
SBA (386) — (386) (356)
Single family residential mortgage — — — (552)
Other consumer — — — (4)
Total charge-offs (886) — (1,451) (2,076)
Recoveries:
Commercial and industrial 23 119 68 149
SBA 3 — 129 121
Single family residential mortgage — 488 — 639
Other consumer — 1 1 49
Total recoveries 26 608 198 958
Net (charge-offs) recoveries (860) 608 (1,253) (1,118)
(Reversal of) provision for credit losses - loans (2,608) 11,519 (3,892) 26,230
ALL at end of period $ 75,885 $ 90,370 $ 75,885 $ 90,370
Average total loans held-for-investment $ 5,769,428 $ 5,687,652 $ 5,775,992 $ 5,723,094
Total loans held-for-investment at end of period $ 5,985,477 $ 5,627,696 $ 5,985,477 $ 5,627,696
Ratios:
Annualized net charge-offs to average total loans held-for-investment 0.06 % (0.04) % 0.04 % 0.04 %
ALL to total loans held-for-investment 1.27 % 1.61 % 1.27 % 1.61 %

~~(1)~~Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather that the previously applied incurred loss methodology.

Alternative Energy Partnerships

We invest in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits) and other tax benefits. The investment helps promote the development of renewable energy sources and help lower the cost of housing for residents by lowering homeowners’ monthly utility costs.

As our respective investments in these entities are more than minor, we have significant influence, but not control, over the investee’s activities that most significantly impact its economic performance. As a result, we are required to apply the equity method of accounting, which generally prescribes applying the percentage ownership interest to the investee’s GAAP net income in order to determine the investor’s earnings or losses in a given period. However, because the liquidation rights, tax credit allocations and other benefits to investors can change upon the occurrence of specified events, application of the equity method based on the underlying ownership percentages would not accurately represent our investment. As a result, we apply the Hypothetical Liquidation at Book Value (“HLBV”) method of the equity method of accounting.

The HLBV method is a balance sheet approach whereby a calculation is prepared at each balance sheet date to estimate the amount that we would receive if the equity investment entity were to liquidate all of its assets (as valued in accordance with GAAP) and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is our share of the earnings or losses from the equity investment for the period.

~~Table of Contents~~

The following table presents the activity related to our investment in alternative energy partnerships for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Balance at beginning of period	Balance at beginning of period	$	23,809	$	27,347	$	27,977	$	29,300	Balance at beginning of period	$	25,156	$	23,809	$	25,888	$	27,977
New funding		—		—		—		3,631

Change in unfunded commitments		—		—		—		(3,225)

Cash distribution from investments	Cash distribution from investments	(570)		(547)		(1,108)		(1,001)		Cash distribution from investments	(582)		(570)		(1,156)		(1,108)
Gain (loss) on investments using HLBV method	Gain (loss) on investments using HLBV method	829		167		(2,801)		(1,738)		Gain (loss) on investments using HLBV method	(1,043)		829		(1,201)		(2,801)
Balance at end of period	Balance at end of period	$	24,068	$	26,967	$	24,068	$	26,967	Balance at end of period	$	23,531	$	24,068	$	23,531	$	24,068
Unfunded equity commitments at end of period	Unfunded equity commitments at end of period	$	—	$	—	$	—	$	—	Unfunded equity commitments at end of period	$	—	$	—	$	—	$	—

Our most recent investment in alternative energy partnerships totaling $3.6 million occurred in March 2020.

During the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, we recognized ~~gains~~net losses on investment of ~~$829 thousand~~$1.0 million and ~~$167~~net gains of $829 thousand. During the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, we recognized net losses on investment of ~~$2.8~~$1.2 million and ~~$1.7~~$2.8 million. The HLBV losses for the six months ended June 30, 2021 and 2020 were largely driven by accelerated tax depreciation on equipment and the recognition of energy tax credits which reduces the amount distributable by the investee in a hypothetical liquidation under the contractual liquidation provisions. From an income tax ~~benefit~~benefits perspective, we recognized no investment tax credits during these periods; however, we recorded income tax (benefit) expense related to these investments of ~~$228~~$(301) thousand and ~~$38~~$228 thousand for the three months ended June 30, 2022 and 2021 and ~~2020 and income tax benefit of $770~~$(347) thousand and ~~$398~~$(770) thousand for the six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

For additional information, see Note 12 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

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Deposits

The following table shows the composition of deposits by type as of the dates indicated:


		June 30, 2021				December 31, 2020							June 30, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Amount		% of Total Deposits		Amount		% of Total Deposits		Amount Change		($ in thousands)	Amount		% of Total Deposits		Amount		% of Total Deposits		Amount Change
Noninterest-bearing deposits	Noninterest-bearing deposits	$	1,808,918	29.1	%	$	1,559,248	25.6	%	$	249,670	Noninterest-bearing deposits	$	2,826,599	37.4	%	$	2,788,196	37.5	%	$	38,403
Interest-bearing demand deposits	Interest-bearing demand deposits	2,217,306		35.7	%	2,107,942		34.6	%	109,364		Interest-bearing demand deposits	2,359,857		31.2	%	2,393,386		32.2	%	(33,529)
Savings accounts		901,334		14.5	%	932,363		15.3	%	(31,029)
Money market accounts		692,390		11.2	%	714,297		11.7	%	(21,907)

Savings and money market accounts												Savings and money market accounts	1,622,922		21.4	%	1,751,135		23.5	%	(128,213)
Certificates of deposit of $250,000 or less	Certificates of deposit of $250,000 or less	239,580		3.9	%	316,585		5.2	%	(77,005)		Certificates of deposit of $250,000 or less	374,117		4.9	%	285,768		3.8	%	88,349

Certificates of deposit of more than $250,000	Certificates of deposit of more than $250,000	347,016		5.6	%	455,365		7.6	%	(108,349)		Certificates of deposit of more than $250,000	375,188		5.0	%	220,950		3.0	%	154,238
Total deposits	Total deposits	$	6,206,544	100.0	%	$	6,085,800	100.0	%	$	120,744	Total deposits	$	7,558,683	100.0	%	$	7,439,435	100.0	%	$	119,248

Table of Conte nts

Total deposits were ~~$6.2~~$7.6 billion at June 30, ~~2021,~~2022, an increase of ~~$120.7~~$119.2 million, or ~~2.0%~~1.6%, from ~~$6.1~~$7.4 billion at December 31, ~~2020. We continue~~2021 due mostly to ~~focus on growing relationship-based~~higher certificates of deposits ~~strategically augmented~~of $242.6 million and noninterest-bearing checking balances of $38.4 million, offset by ~~wholesale funding, as we actively managed down deposit costs in response to the current interest rate environment.~~lower savings and money market balances of $128.2 million and interest-bearing demand deposits of $33.5 million. Noninterest-bearing deposits totaled ~~$1.81~~$2.83 billion and represented ~~29.1%~~37.4% of total deposits at June 30, ~~2021~~2022 compared to ~~$1.56~~$2.79 billion and ~~25.6%~~37.5% at December 31, ~~2020.~~

During the six months ended June 30, 2021, demand deposits increased by $359.0 million, due to higher noninterest-bearing deposits of $249.7 million and interest-bearing demand deposits of $109.4 million. These increases were offset by decreases in savings accounts of $31.0 million, money market accounts of $21.9 million, and time deposits of $185.4 million.2021.

Brokered deposits were ~~$10.0~~$133.6 million at June 30, ~~2021, and $26.2 million~~2022. There were no brokered deposits at December 31, ~~2020. The decrease between periods related to maturities of brokered time deposits.~~2021.

The following table presents the scheduled maturities of certificates of deposit as of June 30, ~~2021:~~2022:


($ in thousands)	($ in thousands)	Three Months or Less		Over Three Months Through Six Months		Over Six Months Through Twelve Months		Over One Year		Total		($ in thousands)	Three Months or Less		Over Three Months Through Six Months		Over Six Months Through Twelve Months		Over One Year		Total
Certificates of deposit of $250,000 or less	Certificates of deposit of $250,000 or less	$	72,794	$	60,317	$	71,071	$	35,398	$	239,580	Certificates of deposit of $250,000 or less	$	138,342	$	63,080	$	49,114	$	123,581	$	374,117
Certificates of deposit of more than $250,000	Certificates of deposit of more than $250,000	130,340		145,919		35,881		34,876		347,016		Certificates of deposit of more than $250,000	153,956		173,398		30,652		17,182		375,188
Total certificates of deposit	Total certificates of deposit	$	203,134	$	206,236	$	106,952	$	70,274	$	586,596	Total certificates of deposit	$	292,298	$	236,478	$	79,766	$	140,763	$	749,305

Borrowings

We ~~utilized~~utilize FHLB advances to leverage our capital base, to provide funds for lending and investing activities, as a source of liquidity, and to enhance interest rate risk management. We also ~~maintained~~maintain additional borrowing availabilities from Federal Reserve Discount Window and unsecured federal funds lines of credit.

During the six months ended June 30, ~~2021,~~2022, FHLB advances ~~decreased $49.4~~increased $35.6 million, or ~~9.1%~~7.5%, to ~~$490.4~~$511.7 million, net of unamortized debt issuance costs of ~~$5.6~~$4.3 million, as of June 30, ~~2021, primarily~~2022, due to ~~maturities~~an increase in overnight borrowings of ~~term advances of $50.0~~$35.0 million.

At June 30, ~~2021,~~2022, FHLB advances included ~~$85.0~~$105.0 million in overnight borrowings and $411.0 million in term advances with a weighted average life of ~~4.5~~3.5 years and weighted average interest rate of 2.53%.

We did not utilize repurchase agreements at June 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

The Bank ~~maintained~~maintains available unsecured federal funds lines with five correspondent banks totaling $210.0 million, with no outstanding borrowings at June 30, ~~2021.~~2022.

The Bank also has the ability to perform unsecured overnight borrowing from various financial institutions through the American Financial Exchange platform ~~(AFX)~~("AFX"). The availability of such unsecured borrowings fluctuates regularly, ~~and are~~

~~Table of Contents~~

is subject to the counterparties discretion and totaled ~~$441.0 million and $196.0~~$445.0 million at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Borrowings under the AFX totaled ~~$125.0~~$85.0 million and $25.0 million at June 30, 2022 and December 31, 2021.

The holding company maintains a $50.0 million revolving line of credit, which matures on December 19, 2022. We have the option to select paying interest using either (i) Prime Rate or (ii) LIBOR + 1.75%. The line of credit is also subject to an unused commitment fee of 0.40% per annum. Borrowings under the line of credit totaled $13.0 million and zero at June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The line of credit is subject to certain operational and financial covenants and we were in compliance with these covenants at June 30, 2022.

For additional information, see Note 6 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Long-term Debt

The following table presents our long-term debt as of the dates indicated:

June 30, 2021 December 31, 2020
($ in thousands) Par Value Unamortized Debt Issuance Cost and Discount Par Value Unamortized Debt Issuance Cost and Discount
5.25% senior notes due April 15, 2025 $ 175,000 $ (1,193) $ 175,000 $ (1,291)
4.375% subordinated notes due October 30, 2030 85,000 (2,253) 85,000 (2,394)
Total $ 260,000 $ (3,446) $ 260,000 $ (3,685)

Table of Conte nts


			June 30, 2022				December 31, 2021
($ in thousands)	Interest Rate	Maturity Date	Par Value		Unamortized Debt Issuance Cost and Discount		Par Value		Unamortized Debt Issuance Cost and Discount
Senior notes	5.25%	4/15/2025	$	175,000	$	(910)	$	175,000	$	(1,014)
Subordinated notes	4.375%	10/30/2030	85,000		(2,030)		85,000		(2,127)
PMB Statutory Trust III, junior subordinated debentures	Libor + 3.40%	9/26/2032	7,217		—		7,217		—
PMB Capital Trust III, junior subordinated debentures	Libor + 2.00%	10/8/2034	10,310		—		10,310		—
Total			$	277,527	$	(2,940)	$	277,527	$	(3,141)

At June 30, ~~2021,~~2022, we were in compliance with all covenants under our long-term debt agreements.

Liquidity Management

We are required to maintain sufficient liquidity to ensure a safe and sound operation. Liquidity may increase or decrease depending upon availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations, including both expected and unexpected cash flow needs such as funding loan commitments, potential deposit outflows and dividend payments. Cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained.

As a result of current economic conditions, including government stimulus in response to the pandemic, we have participated in the elevated levels of liquidity in the marketplace. A portion of the additional liquidity is viewed as short-term as it is expected to be used by clients in the near term and, accordingly, we have maintained higher levels of liquid assets. We have ~~not~~ observed ~~a change~~reductions in average line usage due to the levels of liquidity in the ~~level of clients' credit~~marketplace. We expect to see higher line ~~usage and~~utilization as ~~the Bank's PPP loans are expected~~liquidity moderates to ~~be forgiven over the next 9 to 12 months..~~historical levels.

Banc of California, N.A.

At June 30, 2021, the Company had borrowing capacity with the Federal Reserve Bank of San Francisco (“Federal Reserve”) of $269.5 million, including the secured borrowing capacity through the Federal Reserve Discount Window and Borrower-in-Custody ("BIC") program. At June 30, 2021, the Bank has pledged certain qualifying loans with an unpaid principal balance of $553.1 million and securities with a carrying value of $8.9 million as collateral for these lines of credit. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were no borrowings under this arrangement for the three and six months ended June 30, 2021.

The Bank's liquidity, represented by cash and cash equivalents and securities available-for-sale, is a product of its operating, investing, and financing activities. The Bank's primary sources of funds are deposits, payments and maturities of outstanding loans and investment securities; sales of loans, ~~and~~ investment securities, and other short-term ~~investments~~investments; and funds provided from operations. While scheduled payments from the amortization of loans and investment securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. ~~In addition, the Bank invests excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.~~

The Bank also generates cash through ~~borrowings.~~secured and unsecured secondary sources of funds. The Bank ~~mainly utilizes FHLB advances from~~maintains pre-established secured lines of credit with the FHLB and the FRB as a secondary ~~source~~sources of liquidity to provide funds for its lending and investment activities and to enhance its interest rate risk and liquidity risk management. At June 30, 2022, we had available unused secured borrowing capacities of $985.4 million from the FHLB and $789.0 million through the Federal Reserve Bank's Discount Window and Borrower-in-Custody (“BIC”) programs. At June 30, 2022 and December 31, 2021, FHLB advances totaled $511.7 million and $476.1 million, net of unamortized debt issuance costs of $4.3 million and $4.9 million. At June 30, 2022, the Bank had pledged certain qualifying loans with an unpaid principal balance of $2.38 billion and securities with a carrying value of $205.5 million.

Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were no borrowings under the FRB's Discount Window and BIC programs at June 30, 2022 and December 31, 2021. At June 30, 2022, the Bank had pledged certain qualifying loans with an unpaid principal balance of $1.01 billion and securities with a carrying value of $123.2 million as collateral for these FRB programs. The Bank may also ~~has additional sources of secondary liquidity through its ability to obtain brokered deposits or use~~utilize securities sold under repurchase agreements to leverage its capital base ~~as well as a pre-established secured line of credit through~~and while it maintains repurchase agreements, there were none outstanding at June 30, 2022 and December 31, 2021. Availabilities and terms on repurchase agreements are subject to the ~~Federal Reserve BIC program. Liquidity management is both a daily~~counterparties' discretion and ~~long-term function of business management. Any excess liquidity is typically invested in federal funds or~~our pledging additional investment securities. ~~On a longer-term basis, the Bank maintains a strategy of investing in various lending products.~~ The Bank ~~uses its sources of funds primarily to meet its ongoing loan and other commitments, and to pay maturing certificates of deposit and savings withdrawals.~~had unpledged securities available-for-sale aggregating $846.5 million at June 30, 2022.

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In addition, the Bank has additional sources of secondary liquidity through pre-established unsecured fed funds lines with correspondent banks, pre-approved unsecured overnight borrowing lines with various financial institutions through the AFX platform, and our ability to obtain brokered deposits. The availability of unsecured borrowings through the AFX platform fluctuates regularly and is subject to the counterparties' discretion and totaled $445.0 million at June 30, 2022. Borrowings under the AFX platform totaled $85.0 million and $25.0 million at June 30, 2022 and December 31, 2021. At June 30, 2022, the Bank had $210.0 million in pre-established unsecured federal funds lines of credit with correspondent banks. There were no borrowings with these correspondent banks at June 30, 2022 and December 31, 2021.

Banc of California, Inc.

The primary sources of funds for Banc of California, Inc., on a stand-alone holding company basis, are dividends and intercompany tax payments from the Bank, outside borrowing, and ~~our~~its ability to raise capital and issue debt securities. Dividends from the Bank are largely dependent upon the Bank's earnings and are subject to restrictions under certain regulations that limit its ability to transfer funds to the holding company. OCC regulations impose various restrictions on the ability of a bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items. Generally, a well-capitalized bank may make capital distributions during any calendar year equal to up to 100 percent of year-to-date net income plus retained net income for the two preceding years without prior OCC approval. However, any dividend paid by the Bank would be limited by the need to maintain its well-capitalized status plus the capital buffer in order to avoid additional dividend restrictions (Refer to Capital - Dividend Restrictions below for additional information). Currently, the Bank does not have sufficient dividend-paying capacity to declare and pay such dividends to the holding company without obtaining prior approval from the OCC under the applicable regulations. During the six months ended June 30, ~~2021, the Bank paid $12.0~~2022, there were $66.0 million of dividends paid by the Bank to Banc of California, Inc. At June 30, ~~2021,~~2022, Banc of California, Inc. had ~~$36.9~~$25.0 million in cash, all of which was on deposit at the Bank.

On ~~February 10, 2020,~~March 15, 2022, we announced that our Board of Directors authorized the repurchase of up to ~~$45~~$75 million of our common stock. The repurchase authorization ~~expired~~expires in ~~February 2021. There were no common stock repurchases during~~March 2023. During the ~~six~~three months ended June 30, ~~2021.~~

2022, common stock repurchased under the program totaled 2,113,176 shares at a weighted average price of $18.38. During the six months ended June 30, ~~2021,~~2022, common stock repurchased under the program totaled 2,328,726 shares at a weighted average price of $18.52. As of June 30, 2022, the Company had $31.9 million remaining under the current stock repurchase authorization.

On March 15, 2022 we ~~repurchased~~redeemed all outstanding Series E Preferred Stock, and the corresponding depositary shares, each representing ~~shares~~a 1/40th interest in a share of ~~our~~the Series D.E Preferred Stock. The ~~aggregate total consideration~~redemption price for the Series DE Preferred Stock was $1,000 per share (equivalent to $25 per Series E Depositary Share). Upon redemption, the Series E Preferred Stock and the Series E Depositary Shares were no longer outstanding and all rights with respect to such stock and depositary shares ~~purchased was $93.3 million.~~ceased and terminated, except the right to payment of the redemption price. Also upon redemption, the Series E Depositary Shares were delisted from trading on the New York Stock Exchange. The ~~$3.3~~$3.7 million difference between the consideration paid and the ~~$89.9~~$95.0 million aggregate carrying value of the Series DE Preferred Stock was reclassified to retained earnings and resulted in a decrease to net income allocated to common ~~stockholders.~~stockholders

On a consolidated basis, cash and cash equivalents totaled ~~$163.3~~$243.1 million, or ~~2.0%~~2.6% of total assets at June 30, ~~2021.~~2022. This compared to ~~$220.8~~$228.1 million, or ~~2.8%~~2.4% of total assets, at December 31, ~~2020.~~2021. The ~~$57.5~~$14.9 million ~~decrease~~increase was due mainly ~~due~~ to (i) net income of $75.2 million generated during the ~~decrease~~year, (ii) a $108.0 million increase in ~~deposits.~~FHLB advances and other borrowings, (iii) a $119.2 million increase in deposits, and (iv) net investment securities inflows of $61.6 million from repayments, net of securities purchases, offset by (iv) net loan outflows of $167.3 million from originations net of repayments and loan purchases, (v) the redemption of Series E Preferred Stock of $98.7 million, (vi) payments of common and preferred dividends of $9.1 million , and (vii) repurchases of common stock of $43.2 million.

In December 2021, the holding company entered into a $50.0 million revolving line of credit. The line of credit matures on December 19, 2022. We have the option to pay interest using either (i) Prime Rate or (ii) LIBOR + 1.75%. The line of credit is also subject to an unused commitment fee of 0.40% per annum. At June 30, ~~2021, we had available unused secured borrowing capacities~~2022, there were $13.0 million in borrowings under this line of ~~$753.7 million from the FHLB and $269.5 million from the Federal Reserve, as well as $210.0 million from unsecured federal funds lines of~~ credit. We also maintained repurchase agreements of which none were outstanding at June 30, 2021. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and pledging additional investment securities. We also had unpledged securities available-for-sale of $1.32 billion at June 30, 2021. We also have the ability to perform unsecured overnight borrowing from various financial institutions through the American Financial Exchange platform (AFX). The availability of such unsecured borrowings fluctuates regularly and are subject to the counterparties discretion and totaled $441.0 million at June 30, 2021. Borrowings under the AFX totaled $125.0 million and zero at June 30, 2021 and December 31, 2020.

We believe that our liquidity sources are stable and are adequate to meet our day-to-day cash flow requirements as of June 30, ~~2021.~~2022. However, in light of the ongoing COVID-19 pandemic, we cannot predict at this time the extent to which the pandemic ~~will~~may negatively affect our business, financial condition, liquidity, capital and results of operations.

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Commitments and Contractual Obligations

The following table presents our commitments and contractual obligations as of June 30, ~~2021:~~2022:


		Commitments and Contractual Obligations											Commitments and Contractual Obligations
($ in thousands)	($ in thousands)	Total Amount Committed		Within One Year		More Than One Year Through Three Years		More Than Three Year Through Five Years		Over Five Years		($ in thousands)	Total Amount Committed		Within One Year		More Than One Year Through Three Years		More Than Three Years Through Five Years		Over Five Years
Commitments to extend credit	Commitments to extend credit	$	88,629	$	12,345	$	54,783	$	18,517	$	2,984	Commitments to extend credit	$	234,283	$	19,617	$	162,078	$	21,965	$	30,623
Unused lines of credit	Unused lines of credit	1,528,218		1,305,615		115,944		63,699		42,960		Unused lines of credit	2,000,345		1,720,837		195,198		45,945		38,365
Standby letters of credit	Standby letters of credit	8,377		7,956		421		—		—		Standby letters of credit	10,124		9,294		—		830		—
Total commitments	Total commitments	$	1,625,224	$	1,325,916	$	171,148	$	82,216	$	45,944	Total commitments	$	2,244,752	$	1,749,748	$	357,276	$	68,740	$	68,988
FHLB advances	FHLB advances	$	496,000	$	85,000	$	—	$	311,000	$	100,000	FHLB advances	$	516,000	$	105,000	$	291,000	$	120,000	$	—

Other borrowings	Other borrowings	125,000		125,000		—		—		—		Other borrowings	98,000		98,000		—		—		—
Long-term debt	Long-term debt	260,000		—		—		175,000		85,000		Long-term debt	277,527		—		175,000		—		102,527
Operating and capital lease obligations	Operating and capital lease obligations	23,920		4,987		7,613		5,400		5,920		Operating and capital lease obligations	38,517		9,005		16,037		9,570		3,905
Certificates of deposit	Certificates of deposit	586,596		516,322		67,232		3,042		—		Certificates of deposit	749,305		608,542		138,261		2,502		—
Total contractual obligations	Total contractual obligations	$	1,491,516	$	731,309	$	74,845	$	494,442	$	190,920	Total contractual obligations	$	1,679,349	$	820,547	$	620,298	$	132,072	$	106,432

At June 30, ~~2021,~~2022, we had unfunded commitments of ~~$16.1~~$14.9 million, ~~$5.6~~$9.4 million, and ~~$2.5~~$7.9 million for ~~affordable housing fund~~LIHTC investments, SBIC investments, and other investments, ~~including investments in alternative energy partnerships,~~ respectively.

Capital

In order to maintain adequate levels of capital, we continuously assess projected sources and uses of capital to support projected asset growth, operating needs and credit risk. We consider, among other things, earnings generated from operations and access to capital from financial markets. In addition, we perform capital stress tests on an annual basis to assess the impact of adverse changes in the economy on our capital base. During the first half of 2022, increases in market interest rates resulted in higher net unrealized losses in our securities portfolio and stockholders’ equity. As market interest rates increase, bond prices tend to fall and, consequently, the fair value of our securities may also decrease. To this end, we may have further net unrealized losses on our securities classified as available–for-sale, which would negatively affect our total and tangible stockholders’ equity.

Regulatory Capital

The Company and the Bank are subject to the regulatory capital adequacy guidelines that are established by the Federal banking regulators. In July 2013, the Federal banking regulators approved a final rule to implement the revised capital adequacy standards of the Basel III and to address relevant provisions of the Dodd-Frank Act. The final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the calculation of risk-weighted assets, and adjusts the prompt corrective action thresholds. The Company and the Bank became subject to the new rule on January 1, 2015 and certain provisions of the new rule were phased in through January 1, 2019. Inclusive of the ~~fully phased-in~~ capital conservation buffer, the common equity Tier 1 capital, Tier 1 risk-based capital and total risk-based capital ratio minimums are 7.0%, 8.5% and 10.5%, respectively.

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The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:

Minimum Capital Requirements Minimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands) Amount Ratio Amount Ratio Amount Ratio
June 30, 2021
Banc of California, Inc.
Total risk-based capital $ 926,650 15.33 % $ 483,445 8.00 % N/A N/A
Tier 1 risk-based capital 768,313 12.71 % 362,583 6.00 % N/A N/A
Common equity tier 1 capital 673,357 11.14 % 271,938 4.50 % N/A N/A
Tier 1 leverage 768,313 9.89 % 310,848 4.00 % N/A N/A
Banc of California, NA
Total risk-based capital $ 1,042,549 17.25 % $ 483,456 8.00 % $ 604,320 10.00 %
Tier 1 risk-based capital 972,134 16.09 % 362,592 6.00 % 483,456 8.00 %
Common equity tier 1 capital 972,134 16.09 % 271,944 4.50 % 392,808 6.50 %
Tier 1 leverage 972,134 12.52 % 310,563 4.00 % 388,204 5.00 %
December 31, 2020
Banc of California, Inc.
Total risk-based capital $ 996,466 17.01 % $ 468,628 8.00 % N/A N/A
Tier 1 risk-based capital 840,501 14.35 % 351,471 6.00 % N/A N/A
Common equity tier 1 capital 655,623 11.19 % 263,603 4.50 % N/A N/A
Tier 1 leverage 840,501 10.90 % 308,555 4.00 % N/A N/A
Banc of California, NA
Total risk-based capital $ 1,011,587 17.27 % $ 468,698 8.00 % $ 585,873 10.00 %
Tier 1 risk-based capital 938,346 16.02 % 351,524 6.00 % 468,698 8.00 %
Common equity tier 1 capital 938,346 16.02 % 263,643 4.50 % 380,817 6.50 %
Tier 1 leverage 938,346 12.19 % 307,894 4.00 % 384,868 5.00 %

On October 30, 2020, we completed the issuance and sale of $85.0 million aggregate principal amount of 4.375% Fixed-to-Floating Rate Subordinated Notes due 2030, at a public offering price equal to 100% of the aggregate principal amount of the Notes which qualifies as Tier II capital.


					Minimum Capital Requirements				Minimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2022
Banc of California, Inc.
Total risk-based capital	$	1,080,107	13.69	%	$	631,119	8.00	%	N/A		N/A
Tier 1 risk-based capital	890,341		11.29	%	473,339		6.00	%	N/A		N/A
Common equity tier 1 capital	890,341		11.29	%	355,005		4.50	%	N/A		N/A
Tier 1 leverage	890,341		9.58	%	371,732		4.00	%	N/A		N/A
Banc of California, NA
Total risk-based capital	$	1,225,571	15.54	%	$	630,958	8.00	%	$	788,697	10.00	%
Tier 1 risk-based capital	1,136,569		14.41	%	473,218		6.00	%	630,958		8.00	%
Common equity tier 1 capital	1,136,569		14.41	%	354,914		4.50	%	512,653		6.50	%
Tier 1 leverage	1,136,569		12.27	%	370,667		4.00	%	463,334		5.00	%
December 31, 2021
Banc of California, Inc.
Total risk-based capital	$	1,140,480	14.98	%	$	609,062	8.00	%	N/A		N/A
Tier 1 risk-based capital	955,747		12.55	%	456,796		6.00	%	N/A		N/A
Common equity tier 1 capital	860,841		11.31	%	342,597		4.50	%	N/A		N/A
Tier 1 leverage	955,747		10.37	%	368,610		4.00	%	N/A		N/A
Banc of California, NA
Total risk-based capital	$	1,195,050	15.71	%	$	608,740	8.00	%	$	760,925	10.00	%
Tier 1 risk-based capital	1,110,767		14.60	%	456,555		6.00	%	608,740		8.00	%
Common equity tier 1 capital	1,110,767		14.60	%	342,416		4.50	%	494,601		6.50	%
Tier 1 leverage	1,110,767		12.06	%	368,306		4.00	%	460,382		5.00	%

Dividend Restrictions

Payment of dividends by the Company are subject to guidance provided by the Federal Reserve. That guidance provides that bank holding companies that plan to pay dividends that exceed net earnings for a given period should first consult with the Federal Reserve. To the extent future quarterly dividends exceed quarterly net earnings, payment of dividends in respect of the Company’s common ~~and preferred~~ stock will be subject to prior consultation and non-objection from the Federal Reserve.

Our principal source of funds for dividend payments is dividends received from the Bank. Federal banking laws and regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, in the case of the Bank, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. Accordingly, any dividend granted by the Bank would be limited by the need to maintain its well capitalized status plus the capital buffer in order to avoid additional dividend restrictions. As described above, any near term dividend by the Bank will require OCC approval. During the three and six months ended June 30, ~~2021,~~2022, the Bank paid ~~zero~~$50.0 million and ~~$12.0~~$66.0 million in dividends to Banc of California, Inc.

During both the three and six months ended June 30, ~~2021,~~2022, we declared and paid dividends on our common stock of $0.06 and $0.12 per share totaling ~~$3.0~~$3.7 million and ~~$6.0~~$7.4 million in addition to dividends on our preferred stock totaling ~~$1.7 million~~zero and ~~$4.9~~$1.7 million.

~~Table of Contents~~

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities.

Table of Conte nts

The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.

We maintain both a management asset/liability committee (“Management ALCO”), comprised of select members of senior management, and a joint asset/liability committee of the Boards of Directors of the Company and the Bank (“Board ALCO”, together with Management ALCO, “ALCOs”). In order to manage the risk of potential adverse effects of material and prolonged or volatile changes in interest rates on our results of operations, we have adopted asset/liability management policies to align maturities and repricing terms of interest-earning assets to interest-bearing liabilities. The asset/liability management policies establish guidelines for the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs, while management monitors adherence to those guidelines with oversight by the ALCOs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The ALCOs meet no less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to our net present value of equity analysis.

In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we evaluate various strategies including:

•Originating and purchasing adjustable rate mortgage loans,

•Selling longer duration fixed or hybrid mortgage loans,

•Originating shorter-term consumer loans,

•Managing the duration of investment securities,

•Managing our deposits to establish stable deposit relationships, ~~and grow noninterest-bearing deposits which tend to have a lower expectation of yield,~~

•Using FHLB advances and/or certain derivatives such as swaps to align maturities and repricing terms, and

•Managing the percentage of fixed rate loans in our portfolio.

At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase our interest rate risk position within the asset/liability tolerance set forth by our Board of Directors.

As part of its procedures, the ALCOs regularly review interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution’s existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity.

Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income

Interest rate risk results from our banking activities and is the primary market risk for us. Interest rate risk is caused by the following factors:

•Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;

•Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity;

•Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and

•Basis risk - changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate and London Interbank Offered Rate.

~~Table of Contents~~

Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Management of our interest rate risk is overseen by the Board ALCO. Board ALCO delegates the day to day management of interest rate risk to the Management ALCO. Management ALCO ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our interest rate risk program. Board ALCO reviews the results of our interest rate risk modeling quarterly to ensure that we have appropriately measured our interest rate risk, mitigated our exposures appropriately

Table of Conte nts

and any residual risk is acceptable. In addition to our annual review of ~~the Asset Liability Management~~our asset liability management policy, our Board of Directors periodically reviews the interest rate risk policy limits.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic repricing characteristics of our assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve (“Rate Shock”). We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled utilizing various assumptions for assets, liabilities, and ~~derivatives for 12 and 24 months.~~derivatives.

EVE ~~is a cash flow calculation that takes~~measures the ~~present~~period end market value of ~~all asset cash flows and subtracts~~assets minus the ~~present~~market value of ~~all liability cash flows. This calculation is used for asset/~~liabilities. Asset liability management ~~and measures~~uses this value to measure the changes in the economic value of the ~~bank~~Bank under various interest rate scenarios. ~~The~~In some ways, the economic value approach provides a ~~comparatively~~ broader scope than ~~the~~ net income volatility approach since it captures all anticipated cash flows.

The balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our net interest margin, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities. Conversely, the balance sheet is considered “liability sensitive” when an increase in short-term interest rates is expected to compress our net interest margin, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.

At June 30, ~~2021,~~2022, our interest rate risk profile reflects an “asset sensitive” position. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary from those predicted by our model.

The following table presents the projected change in the Bank’s economic value of equity at June 30, ~~2021~~2022 and net interest income over the next twelve months, that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change:


		Change in Interest Rates in Basis Points (bps) (1)													Change in Interest Rates in Basis Points (bps) (1)
($ in thousands)	($ in thousands)	Economic Value of Equity						Net Interest Income						($ in thousands)	Economic Value of Equity						Net Interest Income
		Amount		Amount Change		Percentage Change		Amount		Amount Change		Percentage Change			Amount		Amount Change		Percentage Change		Amount		Amount Change		Percentage Change
June 30, 2021
June 30, 2022														June 30, 2022
+200 bps	+200 bps	$	1,531,420	$	133,707	9.6	%	$	250,054	$	10,748	4.5	%	+200 bps	$	1,724,973	$	53,059	3.2	%	$	355,783	$	7,186	2.1	%
+100 bps	+100 bps	1,470,726		73,013		5.2	%	243,673		4,367		1.8	%	+100 bps	1,702,549		30,635		1.8	%	352,079		3,482		1.0	%
0 bps	0 bps	1,397,713						239,306						0 bps	1,671,914						348,597
-100 bps	-100 bps	1,292,805		(104,908)		(7.5)	%	233,437		(5,869)		(2.5)	%	-100 bps	1,592,289		(79,625)		(4.8)	%	324,877		(23,720)		(6.8)	%
-200 bps														-200 bps	1,478,120		(193,794)		(11.6)	%	306,040		(42,557)		(12.2)	%

(1)Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.

We believe we are well positioned to benefit from the current cycle of rising interest rates. Due to the transformation of the franchise to our relationship-based banking model, with higher percentages of noninterest-bearing deposits and variable rate commercial loans, our one year gap ratio, which compares the percentage of earning assets that are scheduled to mature or reprice within one year to the percentage of rate sensitive term liabilities that are scheduled to mature or reprice within one year, has increased since December 31, 2019. At June 30, 2022, our one year gap ratio stood at 30%. While this is only one measure of asset sensitivity, we expect to see some expansion in our net interest margin as short-term rates increase.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in calculating the table.

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Interest rate risk is the most significant market risk affecting us. Other types of market risk, such as foreign currency exchange risk and commodity price risk, ~~infrequently~~do not arise in the normal course of our business activities and operations.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Act) as of June 30, ~~2021~~2022 was carried out under the supervision and with the participation of the Company’s Principal Executive Officer, Principal Financial Officer and other members of the Company’s senior management. The Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of June 30, ~~2021,~~2022, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company’s management (including the Principal Executive Officer and Principal Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the three months ended June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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PART II — OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

From time to time we are involved as plaintiff or defendant in various legal actions arising in the normal course of business.

~~On April 2, 2019, the first~~ The outcome of ~~three shareholder derivative~~such legal actions Gordon v. Benett, No. 8:19-cv-621, was filed against current and former officers and directors of Banc of California, Inc. in the United States District Court for the Central District of California. The Gordon action asserts claims for breach of fiduciary duty against Halle J. Benett, Jonah Schnel, Jeffrey Karish, Robert Sznewajs, Eric Holoman, Chad Brownstein, Steven Sugarman, Richard Lashley, Douglas Bowers and John Grosvenor. On June 10, 2019, a second shareholder derivative action, Johnston v. Sznewajs, No. 8:19-cv-01152, was filed against current and former officers and directors of Banc of California, Inc. in the United States District Court for the Central District of California. The Johnston action asserts claims for breach of fiduciary duty and unjust enrichment against Robert Sznewajs, Jonah Schnel, Halle Benett, Richard Lashley, Steven Sugarman, John Grosvenor, Chad Brownstein, Jeffrey Karish and Eric Holoman. On June 18, 2019, a third shareholder derivative action, Witmer v. Sugarman, No. 19STCV21088, was filed against current and former officers and directors of Banc of California, Inc. in Los Angeles County Superior Court. The Witmer action asserts claims for breach of fiduciary duty, unjust enrichment and corporate waste against Steven Sugarman, Ronald Nicolas, Jr., Robert Sznewajs, Chad Brownstein, Halle Benett, Douglas Bowers, Jeffrey Karish, Richard Lashley, Jonah Schnel, Eric Holoman and Jeffrey Seabold. On June 24, 2019, the Witmer Action was removed to the United States District Court for the Central District of California and assigned docket number 2:19-cv-5488. On September 23, 2019, the Court, ordered that the Gordon, Johnston, and Witmer actions are consolidated for all purposes, including pre-trial proceedings and trial, and the ~~matter was captioned~~ timing of ultimate resolution are inherently difficult to predict. In ~~re Banc~~the opinion of ~~California Inc. Stockholder Derivative Litigation, No. SA CV 19-621. On November 22, 2019, plaintiffs filed~~management, based upon information currently available to us, any resulting liability, in addition to amounts already accrued, and taking into consideration insurance which may be applicable, would not have a ~~consolidated complaint.~~

~~In general,~~material adverse effect on the consolidated complaint alleges that our board wrongfully refused demands that the plaintiffs made to our board of directors that we should initiate litigation against the various current and former officers and directors based on their alleged role in the purported concealment of the Company's alleged relationship with Jason Galanis and variousCompany’s financial statements made by the Company alleged to be false and misleading. The plaintiffs seek an unspecified amount of damages to be paid by the named defendants to the Company, adoption of corporate governance reforms, and equitable and injunctive relief.

On April 5, 2021, the parties informed the Court that they had reached agreement on a Memorandum of Understanding to resolve the action and hoped to be able to file a Stipulation of Settlement within 90 days. The proposed settlement, which requires Court approval, requires only governance changes by the Company and does not contain a monetary component except for a potential award of attorneys’ fees. On July 8, 2021, the Court stayed the time for the Company to respond to the consolidated complaint and ordered the parties to file a Joint Status Report by August 6, 2021 if a Motion for Preliminary Approval of a settlement has not been filed by that time. The parties are currently negotiating the amount of attorney’s fees, if any, that the Company will cause its insurance carriers to pay to counsel for plaintiffs as part of the settlement that is being negotiated.

or operations.

ITEM 1A - RISK FACTORS

There have been no material changes to the risk factors that appeared under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~Table of Contents~~

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Purchase of Equity Securities by the Issuer
($ in thousands, except per share data) Total Number of Shares Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Total Number of Shares (or Approximate Dollar Value) That May Yet be Purchased Under the Plan
Common Stock:
From April 1, 2021 to April 30, 2021 33,505 $ 18.04 — $ —
From May 1, 2021 to May 31, 2021 2,212 $ 17.51 — $ —
From June 1, 2021 to June 30, 2021 6,184 $ 18.35 — $ —
Total 41,901 $ 18.06 —
Preferred Stock (Depositary Shares):
From April 1, 2021 to April 30, 2021 — $ — — —
From May 1, 2021 to May 31, 2021 — $ — — —
From June 1, 2021 to June 30, 2021 — $ — — —
Total — $ — — —


	Purchase of Equity Securities by the Issuer
($ in thousands, except per share data)	Total Number of Shares	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plan
Common Stock:
From April 1, 2022 to April 30, 2022	1,137,491	$	18.68	1,108,657	$	50,000
From May 1, 2022 to May 31, 2022	401,522	$	18.72	400,683	$	42,500
From June 1, 2022 to June 30, 2022	606,407	$	17.62	603,836	$	31,861
Total	2,145,420	$	18.39	2,113,176

During the three and six months ended June 30, ~~2021,~~2022, purchases of shares of common stock related to shares purchased under our stock repurchase program and shares surrendered by employees in order to pay employee tax liabilities associated with vested awards under our employee stock benefit plans. ~~There were no~~

On March 15, 2022, we announced a repurchase program of up to $75 million of our common stock. The repurchase authorization expires in March 2023. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the SEC. The timing of purchases and the number of shares repurchased under the program will depend on a variety of ~~common stock during the three months ended June 30, 2021 related to the Company's previously announced stock repurchase program.~~factors including price, trading volume, corporate and regulatory requirements and market conditions.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable

ITEM 5 - OTHER INFORMATION

None

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ITEM 6 - EXHIBITS





3.1			Second Articles of Restatement of the charter of the Registrant (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 5, 2018 and incorporated herein by reference.)
3.2			Fifth Amended and Restated Bylaws of the Registrant (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 30, 2017 and incorporated herein by reference.)










10.1			Form of Supplemental Performance Unit Agreement under the 2018 Omnibus Plan
31.1			Rule 13a-14(a) Certification (Principal Executive Officer)
31.2			Rule 13a-14(a) Certification (Principal Financial Officer)
32.0			Rule 13a-14(b) and 18 U.S.C. 1350 Certification
101.0			The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2021~~2022 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statements of Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		BANC OF CALIFORNIA, INC.

Date:	August ~~6, 2021~~8, 2022	/s/ Jared Wolff
		Jared Wolff
		President/Chief Executive Officer (Principal Executive Officer)

Date:	August ~~6, 2021~~8, 2022	/s/ Lynn M. Hopkins
		Lynn M. Hopkins
		Executive Vice President/Chief Financial Officer (Principal Financial Officer)





Date:	August ~~6, 2021~~8, 2022	/s/ ~~Mike Smith~~Diana Hanson
		~~Mike Smith~~Diana Hanson
		Senior Vice President/Chief Accounting Officer (Principal Accounting Officer)

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			Six Months Ended
			Modification Type
	Extension of Maturity	Total
($ in thousands)			Count	Amount		Count	Amount
June 30, 2021



Consumer:
Single family residential mortgage			1	1,800		1	1,800
Total			1	$	1,800	1	$	1,800

June 30, 2020
Commercial:
Commercial and industrial			1	$	5,000	1	$	5,000



Total			1	$	5,000	1	$	5,000


($ in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
June 30, 2021
Core deposit intangibles	$	30,904	$	28,835	$	2,069


December 31, 2020
Core deposit intangibles	$	30,904	$	28,271	$	2,633



	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
($ in thousands except per share data)	Common Stock		Class B Common Stock			Common Stock		Class B Common Stock
Net loss	$	(18,273)	$	(176)		$	(24,804)	$	(238)

Less: participating securities dividends	(93)		(1)			(186)		(2)
Less: preferred stock dividends	(3,409)		(33)			(6,909)		(66)
Less: preferred stock redemption	49		0			570		5


Net loss allocated to common stockholders	$	(21,726)	$	(210)		$	(31,329)	$	(301)

Weighted average common shares outstanding	49,553,598		477,321			49,770,527		477,321
Dilutive effects of stock units	0		0			0		0

Dilutive effects of stock options	0		0			0		0

Average shares and dilutive common shares	49,553,598		477,321			49,770,527		477,321




Basic loss per common share	$	(0.44)	$	(0.44)		$	(0.63)	$	(0.63)



Diluted loss per common share	$	(0.44)	$	(0.44)		$	(0.63)	$	(0.63)


	Deferment & Forbearances(1)(2)
	June 30, 2021					March 31, 2021
($ in thousands)	Number of Loans	Amount(1)(2)		% of Loan Category		Number of Loans	Amount(1)(2)		% of Loan Category

Commercial:
Commercial and industrial	5	$	29,246	1.4	%	5	$	25,427	1.4	%
Commercial real estate	1	1,141		0.1	%	3	3,765		0.4	%
Multifamily	—	—		—	%	2	17,000		1.4	%
SBA	2	3,315		1.3	%	3	13,238		3.9	%


Total commercial	8	33,702		0.7	%	13	59,430		1.3	%
Consumer:
Single family residential mortgage	46	52,384		4.1	%	47	48,831		3.9	%
Other consumer	2	472		1.9	%	2	428		1.6	%
Total consumer	48	52,856		4.0	%	49	49,259		3.8	%
Total	56	$	86,558	1.4	%	62	$	108,689	1.9	%



	By FICO Scores Obtained During the Quarter Ended June 30, 2021					By FICO Scores Obtained During the Quarter Ended December 31, 2020					Change
($ in thousands)	Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent
FICO Score
800+	10	$	3,184	11.1	%	10	$	5,143	17.9	%	—	$	(1,959)	(38.1)	%
700-799	23	20,042		69.6	%	22	15,974		55.5	%	1	4,068		25.5	%
600-699	6	4,772		16.6	%	7	6,881		23.9	%	(1)	(2,109)		(30.6)	%
<600	1	272		0.9	%	1	272		0.9	%	—	—		—	%
No FICO	2	526		1.8	%	2	526		1.8	%	—	—		—	%
Totals	42	$	28,796	100.0	%	42	$	28,796	100.0	%	—	$	—	—	%


($ in thousands)	Green					Interest Only					Negative Amortization					Total
LTV ratio range	Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent
June 30, 2021
< 61%	40	$	26,526	92.1	%	192	$	281,970	65.5	%	5	$	1,690	100.0	%	237	$	310,186	67.3	%
61-80%	2	2,270		7.9	%	97	144,999		33.7	%	—	—		—	%	99	147,269		31.9	%
81-100%	—	—		—	%	—	—		—	%	—	—		—	%	—	—		—	%
> 100%	—	—		—	%	1	3,519		0.8	%	—	—		—	%	1	3,519		0.8	%
Total	42	$	28,796	100.0	%	290	$	430,488	100.0	%	5	$	1,690	100.0	%	337	$	460,974	100.0	%
December 31, 2020
< 61%	42	$	25,946	82.1	%	190	$	271,108	67.5	%	8	$	2,288	100.0	%	240	$	299,342	68.7	%
61-80%	6	5,641		17.9	%	91	126,281		31.4	%	—	—		—	%	97	131,922		30.3	%
81-100%	—	—		—	%	2	4,251		1.1	%	—	—		—	%	2	4,251		1.0	%
> 100%	—	—		—	%	—	—		—	%	—	—		—	%	—	—		—	%
Total	48	$	31,587	100.0	%	283	$	401,640	100.0	%	8	$	2,288	100.0	%	339	$	435,515	100.0	%